5 money moves you need to make by 30
Article Published by: money.cnn.com
Turning 30 is a pretty significant milestone. If you’re coming up on 30, now’s a good time to take stock of your finances and get yourself on a responsible path. Here’s 5 money moves you need to make.
1. Complete your emergency fund
No matter your age, you need an emergency fund with enough cash to pay for three to six months’ worth of living expenses. This way, you’re covered if you find yourself out of work for a spell, or are faced with a sizable unplanned bill, like a major home or automobile repair. If your cash reserves aren’t up to snuff, now’s the time to start making money moves that allow you to fill that emergency account.
You can approach this challenge in a couple of ways. First, try reviewing your budget and seeing if there are any current costs you can cut. If you have a gym membership you’re not really using, or a cable package you can easily downgrade, trimming those expenses could free up enough cash to get you to your goal. Of course, if you’re really behind on savings, you’ll probably need to make bigger changes, like cutting back on leisure or even trading a vehicle for public transportation. The key is to take a close look at your spending and see where there’s room to improve.
Another option for completing your emergency fund is to work a side hustle and bank the extra cash you bring in. Of the 44 million Americans who have an extra job, more than one-third bring home upward of $500 a month from that gig alone, so if cutting expenses doesn’t do the trick, or you’d rather not deprive yourself, working more is a viable option.
2. Start funding your nest egg
You may not feel compelled to save for retirement, what with it being so far away. But now that you’re staring down 30, it’s time to start contributing to a tax-advantaged savings account, like an IRA or 401(k), immediately. Workers under 50 can put up to $5,500 a year into the former and $18,000 a year into the latter, and the earlier you get started, the more opportunity you’ll give your money to grow.
Thanks to the power of compounding, saving money when you’re younger can translate into a major gain when you’re older. For example, investing just $2,400 a year starting at age 30, for a total out-of-pocket contribution of $84,000, results in an ending balance of $413,000 when that money is invested at an average yearly 8% return. Not too shabby.
3. Devise a smart investment strategy
If your goal is to eventually retire in comfort, saving money is only part of the equation. You’ll also need to put your savings to work in order to grow that cash into the largest possible sum.
As a rule of thumb, savers over age 30 should have roughly 80% of their portfolio in stocks. In fact, in the above example, we saw how an 8% average annual return turned $84,000 into $413,000 over 35 years. Well, your best bet for achieving that sort of return is to go heavy on stocks.
Know nothing about investing? No problem. You don’t need to buy individual stocks to capitalize on the market’s returns. Rather, you can load up on ETFs, or exchange-traded funds, and avoid the risk that comes with investing in specific companies. You can also consult our introductory guide to buying stocks if you’re interested in taking a more customized approach to investing. Either way, take some time to figure out where to put your money so you’re more likely to meet your eventual goals.
4. Get out of debt
It’s natural to carry some amount of debt during your 20s, especially if you borrowed money for college. But as 30 approaches, you’d be wise to come up with a plan to knock out that debt so you’re not still carrying it into your 40s. This might mean using one of the above tactics (cutting expenses or working a side gig) to generate extra cash to pay down your loans.
But crucial as it is to eliminate student debt, it’s even more critical to wipe out costly credit card debt. The typical 30-year-old carries a balance of roughly $5,800, but if you’re paying 20% interest on that sum, you can easily get trapped in a cycle where you’re struggling to break free. A better bet is to take a look at your various debts, figure out which are costing you the most interest, and work your way downward.
5. Negotiate a higher salary
Though it pays to fight for more money at any age, by the time you hit 30, you’re more likely to have a solid leg to stand on than a younger worker with limited experience. Not only will boosting your income give you more flexibility to tackle the above-listed goals, but it’ll open the door to higher earnings in the future. That’s because when you do decide to move on to another job, you’ll likely be asked about your current salary, and the higher that number is, the more generous an offer you’re apt to receive.
Not sure how to negotiate a raise? Start by doing your research to see what folks in your industry are commanding. Better yet, narrow your search to similar jobs in your geographic region for a true apples-to-apples comparison. Next, schedule a meeting with your manager that offers ample time to state your case, and present your research along with a list of your greatest on-the-job wins. And be sure to go in with a “nothing to lose” attitude, because really, the worst that can happen is that your boss will say no.
ABOUT MICHAEL SMERIGLIO:
Mike Smeriglio III is a financial specialist. A licensed CPA since 1985, Mike has been providing tax preparation services to individuals and businesses for more than 30 years through his firm located in Greenwich, CT.