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8 Crucial Financial Moves To Make In Your 30’s

8 Crucial Financial Moves To Make In Your 30’s

Your 20’s were fun, maybe too fun.  Now that the dust has settled and you’re part of the real world, here are eight crucial financial moves you must make this decade:

1.  Invest in Yourself

This is the time to separate from the pack.  Spend some of that hard earned money wisely to gain the advanced education, industry certification or specialized job skills necessary to make yourself more qualified, more marketable and ultimately indispensible.

Georgetown’s Center on Education and the Workforce 2011 study found workers with Graduate Degrees make as much as $35,000 more in the same field as their counterparts with only Bachelor’s Degrees (http://cew.georgetown.edu/whatsitworth).

Just because that diploma hangs on your office wall doesn’t mean you’re done learning.  Do what your colleagues won’t do and spend the extra money and time to collect more arrows in your quiver.

2.  Establish an Emergency Fund

Human nature seeks immediate gratification.  True financial security and success comes from training yourself to delay that gratification until a future date.  Having an emergency account for those unexpected expenses keeps you from borrowing and gives you invaluable peace of mind.

This can be a daunting task so start your emergency fund with small amounts at a time.  Make your morning coffee at home four days a week and splurge only on Friday.  Nix all those cable channels you never watch.  Skip the lunches out every day and bring food from home.

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Now put these savings into a new account labeled “Emergency Savings.”  You’re less likely to pull funds from this account frivolously when you’re constantly reminded that it’s for emergencies only.

3.  Stick to a Budget

It’s not sexy but a little self-control and discipline will make your 40’s and 50’s much more enjoyable.  Add kids, school costs, summer camps, etc. and the cushy lifestyle of your 20’s will be a distant memory.  Prepare for this in advance by understanding where your money goes and what you can do to keep more of it.

Setting a budget is more an exercise in discipline more so than tracking every single penny.  There are tons of budget software programs and expense tracking sites out there.  My personal favorite is Mint (www.mint.com). An old saying that rings true to this day says “First we make our habits, then our habits make us.”

4.  Maximize Retirement Savings

If your workplace offers a matching 401k or similar program, you’re a fool to give up free money.  Take advantage of this gift.

Once you’ve contributed enough to get the match and you have an Emergency Fund established, you should consider diverting more towards your retirement accounts.  In traditional 401k, IRA and similar retirement accounts, your investments grow tax deferred until you take income during retirement.  Ask your investment professional about where your money is being invested and pay attention to fees.  You don’t need to be an expert but you need to take responsibility and understand what’s going on — this is your retirement after all.

There are hundreds of calculators you can test but suffice it to say that waiting until you’re 40 to start these retirement savings will leave you at a terrible disadvantage.  Albert Einstein was spot on when he pegged Compound Interest as the Eighth Wonder of the World.

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5.  Manage Financial Risks

Forget about that fancy car you’re driving, the purse collection and your “priceless” vinyl collection.  Your single most valuable asset is your future earnings potential – your ability to make money.

You insure that car, those records and you’d have a conniption if something happened to your handbag.  So why not protect yourself in the same way?

Review your disability and life insurance protection for the sake of your current or future family.  Often times the coverage offered through employee benefits may not be sufficient.  Take a few minutes to complete a disability or life insurance needs analysis and see for yourself (http://www.lifehappens.org/insurance-overview/life-insurance/calculate-your-needs/).

6.  Take Control of Your Credit Cards

This one is simple.  Not easy, but simple.

Carrying credit card balances forces you to pay high interest rates, which, in turn, creates even higher credit card balances.  Break this vicious cycle and use credit cards only when absolutely necessary.

Don’t misunderstand me.  Credit cards serve a very useful purpose but they should be treated as a tool, not the tool.  I speak from experience in saying it’s easy to swipe the card and not think about the consequences.  Do that enough in your 30’s and you can kiss retirement goodbye.

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7.  Understand Good Debt and Bad Debt

In your 30’s, assume debt with extreme caution.  If you’re like most of us 30 somethings, you still have some cleanup from your 20’s to address — don’t make the problem any worse.

Taking on Debt for a quality home purchase, higher education or similar future-focused asset may be wise.  Borrowing money at high interest rates for a new car, those designer shades or for your dream vacation almost never makes financial sense.  The real danger is that these short-term decisions are often the more fun and offer instant gratification but leave you reeling afterwards (see #7 above).

General Rule:

Good Debt = used as leverage towards improved value long term

Bad Debt = used in lieu of cash savings you don’t have to buy something you can’t afford whose value will never be greater than at the time of purchase

8.  Give Back

This may seem crazy or even impossible given the constraints of your everyday life.  Trust me when I say you’ll get more in return than you can ever imagine by giving to those in need.

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Make a regular donation to your favorite local charity.  Don’t have one?  Use a resource like Charity Navigator (http://www.charitynavigator.org) to find a cause near and dear.

If money is tight, consider volunteering your time or your expertise to and organization in need.  Public Relations?  Graphic Designer?  Appliance Technician?  All charities, nonprofits and organizations for the greater good need these services just like any other business.

Arthur Ashe famously said “From what we get we can make a living; what we give, however, makes a life.”

 

Everyone lives a different life and should take their own personal circumstances, careers and families into consideration before making any significant financial decisions — in your 30’s or at any other time.  Consider meeting with a financial professional who may be able to help shape good money habits in this crucial decade.

Featured photo credit: Gratisography via gratisography.com

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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