As Millennials are taking longer to finish college, settle on a career, and move out of their parents’ house, 30 has become the new 20. While these launch delays have some advantages, such as taking extra time to develop maturity, they can have some long-term consequences to your finances and your financial future.
Your Financial Future Starts Now
If you’re already in your 30s, there’s no time like the present to prepare for your financial future. Here are some budgeting tips for you:
Discover the importance of compound interest
“Compound interest” is a complicated sounding term to describe a simple concept: your money giving birth to more money over a period of time. For example, if in your thirties you saved $3,000 a year for the next 30 years until you reach 60, your $90,000 investment will be worth $367,000 five years before you retire. When it comes to compounding interest, time is the ingredient that you can’t replace.
Save for retirement
Armed with the knowledge of compound interest, your next move is to save for retirement. Experts generally suggest saving up to 15% of your gross income. If your company offers a 401(k) match of 4%, that’s money for the taking. All you need to do now is save another 11% on your own.
Be mindful of your credit score
Knowing your credit score will enable you to fix errors fast. It will also allow you to be on top of any delinquent accounts you may have. You can get a free credit report from the three credit bureaus once a year or join sites like NerdWallet and Credit Karma for free. If there is a discrepancy in your statement, you can contact the bureaus directly to correct it.
Set aside money for emergencies
Even if you consider yourself lucky, emergencies do happen, and when they do, it can really upset your budget. Crises are unpredictable, but if you can set aside a decent amount, it will be less of a blow. A typical emergency fund amount would be equivalent to six months of your current salary.
Make sure to pay off student loans
If you still have student loans in your thirties, you have to be careful. This kind of credit can’t be forgiven by declaring bankruptcy, and while its interest rate is low, it can become more and more difficult to pay when you begin to have a mortgage and children. If you have the money now, better to pay those loans off.
Invest in life insurance
While life insurance is one of those bets that you don’t want to win, it’s highly advantageous to get one. It’s just a fact that we can’t get out of this life alive, but if you’re young and healthy, insurance coverage is meager. Make sure to get one that covers existing mortgages, funeral expenses, and, if you’re married, enough money to support your spouse.
Get a 529 college savings plan
If you already have kids, the time to think of your child’s college education is now. With compounding interest through 529 college savings plan, the amount that you will need to shell out, later on, will be significantly less.
If you’ve made financial mistakes in your twenties, don’t sweat it. But make sure to get your act together now so that you can thrive in your thirties and beyond. Now that you’re older and wiser applying these tips will help you find your financial footing and establish a solid foundation.