You spend your 20s learning, experimenting, and making mistakes. It’s when you get closer to the big 3-0 that you really grow into who you are and become older, yet wiser. Even so, one area of life that can be confusing no matter how old you are: money.
Many people learn about money by making mistakes – there’s no Welcome to Adulthood guidebook that gives you all the answers to managing money in your 30s. But don’t worry. In this post, we’ll go over the 10 personal finance principles you should master by 30 so you don’t have to find out the hard way.
1. The value of your dollars
To rock money in your 30s, you should have an idea of how much you actually make and what that can afford you.
It’s easy to look at a nice, hefty gross salary and think you’re doing fine. However, it’s key to look at your salary after taxes and deductions to get a true financial picture. In other words, how much are you actually bringing home? Knowing this will help you be realistic about your goals.
For instance, ask yourself how many hours you have to work in order to buy that daily lunch out.
I was introduced to the concept of measuring spending by hours worked through the great personal finance book “Your Money or Your Life.” I realized my lunch out was costing me a whole hour of work. And dinner and happy hour? I was wasting over half a day of work.
Thinking about purchases this way will give you a clearer picture of how your income and spending are related and can shift your spending habits to prioritize larger goals.
2. How to budget
By the time you’re approaching 30, it’s important to have at least a basic understanding of budgeting.
I know, I know – budgeting can feel boring and restrictive. At the end of the day, though, it’s simply about making sure you spend less than you earn and have a purpose for every dollar.
Even if you’re not a strict budgeter, tracking your expenses and allocating money towards specific spending categories can help you gain control over your finances and make saving money in your 30s easier.
3. The impact of interest
The power of interest can either make you money or cost you money. Regardless, you should be clear on the impact of interest when it comes to all of your financial choices.
For example, how much is interest really adding to your loans? Though I borrowed $81,000 in student loans, with interest I ended up paying closer to six figures. Ugh.
On the other hand, I’ve been saving for years and have seen firsthand how interest can work in my favor. Aside from knowing the impact of interest on your debt as well as your savings, it’s key to understand the magic of compound interest. Compound interest is essentially like interest on top of interest and it can do wonders.
Let’s say you invest your $3,000 tax refund and don’t add another dime for the next 35 years. Under a seven percent return rate, your tax refund would balloon up to $32,029.74.
4. How your credit score is calculated
Your credit score is one of the most important numbers in your life. It determines whether or not you get approved for a mortgage or apartment, credit card, car loan, lower interest rates, cheaper insurance – maybe even a job.
Knowing how your credit score is calculated can help you keep it healthy.
“The majority of a credit score is comprised of five key factors,” said Katie Gampietro Burke, CFP at Wealth by Empowerment. According to Gampietro, those factors include:
- Whether or not you pay your bills on time
- Credit utilization (how much of the credit you have available is actually being used – ideally, you do not want to carry a balance more than 20 percent of your available credit, 30 percent maximum)
- Length of your credit history
- How often you apply for new credit
- Types of credit (a mix of mortgage, student loans, auto loans, revolving credit, etc.)
Your payment history — whether you make payments on time or not — is typically the largest contributing factor to your credit score. Make sure you’re paying your bills on time; if you’re prone to making late payments, consider setting up auto-pay so you never miss a bill.
5. Investing 101
By 30, you should have a grasp of basic investing terms and understand how investing works — and hopefully be investing!
Do you know the difference between a Roth IRA and a Traditional IRA and the various tax benefits? Do you know the differences between stocks and bonds? Most importantly, if you are already investing, do you know how much you are paying in fees?
While learning about investing can often feel like learning another language, it’s one that becomes easier with a little practice. And once you become familiar with how things work, you can invest and build wealth for the future.
When it comes to money in your 30s, investing should be a key player in your financial plan while time is still on your side.
6. When to say no
When you start to make any kind of money in your teens and 20s, it can feel like a rite of passage – you’ve grown up and can spend money on whatever you want.
Spending your own hard-earned money is liberating, but it can also lead to excessive spending because YOLO. If you’re like me, you’ve probably wasted some money on things that leave you shaking your head later.
By the time you get to 30, it’s important to have learned when to say no to things you don’t want to do, you don’t want to spend money on, and that aren’t in your budget. “No” is your friend; use it wisely. Saying “no” when appropriate and understanding your values when it comes to money can make saving money in your 30s easier.
7. How to write a will
Okay, so 30 isn’t exactly old, but it is time to start planning for the future and write a will. While no one likes to think about their own death, not having a plan in place can lead to confusion and trouble if you’re no longer around.
Saul M. Simon, CFP at Simon Financial Group, recommends having both a simple will and a living will.
“If you die without a simple will to distribute your property, your loved ones will be put in a difficult legal position. A living will can help them make medical decisions if you become seriously ill,” Simon explained.
8. Rent or buy?
As you get closer to 30, you may start to think about buying a house. But is it the right choice for you? Though owning a home is a major financial goal for many people, it’s not always a great investment.
Seriously ask yourself if you’re happy with renting or if you really want to own a home. There are no right or wrong answers, but if you want to buy a home, it’s key to start saving for a down payment — at least 20 percent – to avoid paying expensive private mortgage insurance (PMI). Plus, depending on where you live and your lifestyle, it might actually make more financial sense to keep renting.
Don’t forget to factor in additional fees, repairs, taxes and insurance to the overall cost when deciding if homeownership is truly for you.
9. Your insurance needs
At this point, you probably have health insurance (thanks, Obama!). As you get older, however, you’ll want to assess what level of insurance you need in various areas of your life and try to find that Goldilocks balance of just right.
For example, renters insurance can protect your items in the case of theft or if there’s an incident at your apartment. You may also consider life insurance if you have a family or are the primary income earner.
“Imagine the situation a 29-year-old who has just started a family, or with large student loans co-signed by parents, or who just purchased a house would leave if they passed away tomorrow,” said Matt Hylland, a financial planner at Hylland Capital Management.
Now is the best time to look at your insurance needs, as you are most likely young and healthy and can get low rates.
They key is to understand what insurance coverage you have, what coverage you need, and fill in the gaps — just enough to be prepared, but not too much where you are wasting money on expensive premiums.
Money in your 30s should be about building and saving to prepare for your future. And sometimes that means thinking about the not-so-sexy financial things like insurance.
10. The importance of a money mindset
You’ve probably been in and out of a few romantic relationships and some of your friendships have come and gone. It happens. But one area you can still focus on building a solid, long-term relationship with is your money.
Your money mindset affects how you build wealth and how you prepare for the future. Think about some of your long-held beliefs about money and how they may be holding you back from success.
For example, I used to think I’d never get out of debt or make a lot of money, but those were simply things I told myself. Once I changed my money mindset, I started taking action instead of making excuses.
To enhance your money mindset, let go of some of your past mistakes, keep learning, and prepare for your future. Realize that just because you may think you are “bad with money” doesn’t mean you have to actually be that way. Having a positive money mindset is important in reaching your financial goals.
What else would you add to the list? What personal finance principles did you master by 30?
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|