For many people, your 20s are a time of completing study, starting your first ‘proper’ job and spending your hard earned cash however you wish (travel, clothes, setting up a flat or home). As you enter your 30s, we’re often a little more sensible as we’ve learned the value of money and realised that we’re in charge of our financial futures. Regardless of whether we’re single or coupled up, as we enter our 30s this is often the time we commit to buying a house (many people’s single largest investment ever), commit to another person (by way of marriage or opening a joint bank account), or commit to a family (looking after little humans can be expensive!).
So what do you need to think about when it comes to managing money in your 30s?
For starters, it’s never too late to start good financial habits. Having financial goals, being a regular saver and sticking to a budget are all prudent ways to manage your money. As you hit your 30s though, the reality of owning a home and starting a family are likely to get you thinking about the future: insurance to protect your loved ones and valuable assets, investing with spare or bonus cash, paying down debt and retirement planning.
People’s views about money and what financial success means are starting to change. A recent Financial Services Council report that surveyed 2,000 18-39 year olds found that this age group are more concerned about financial issues like house prices, interest rates and inflation than other generations, and are much more likely to worry about money. Hopefully this article helps you get back on track, or confirm that you’re moving in the right direction.
Your 30s are typically a high spend decade. You may be eating out less and spending more of your entertainment and leisure time at home, but these are the years you’re usually furnishing or renovating a home, upgrading your car, and perhaps buying baby paraphernalia.
In your 30s, your financial goals might be better set first, before tackling your monthly budget. What home projects are you wanting to complete in the short, medium and long-term? When are you thinking about starting a family and how many months or years do you have until heading off for parental leave?
Having some significant financial goals in place can help you tweak your budget – forego dinners out in favour of updating your bathroom. Purchase second hand outdoor furniture if you’re intending on re-landscaping the backyard next year. Dial back the clothes budget if you think you may fall pregnant this year and so on.
In professional careers, your 30s may be the time you move from being a junior to a more senior team member, or take on managerial responsibilities. These changes in role usually result in a salary increase so think carefully about how you might make use of this. Although it may be tempting to upgrade your car, or splash out on a holiday, could you make better use of this money by realising a financial goal sooner? Think of common financial goals such as a house deposit, or by paying down debt (extra payments on your student loan could fast track the repayment of this). It’s OK to treat yourself, but scaling back to a nice bottle of wine or dinner out can be a cheaper way than a holiday to say congratulations.
With some work experience behind you, your 30s may see you starting your own business or freelancing. With less certainty around a ‘regular’ income, it is a great idea to save harder in the good months or years, so that you have a financial buffer in the slower months or years. For self-employed people, having an emergency fund is especially important.
A recent Financial Services Council report found that only half of 18-39 year olds could find $5,000 within a week in an emergency. Aim for 3 to 6 months of expenses – use an online emergency fund calculator to work out what your household should aim for.
Your 30s could also be a time where you receive regular cash bonuses or a one-off inheritance from a family member. Although you might want to channel a portion of this into a treat or bucket list adventure, make your money work harder for you by repaying high interest debt, or consider investing it for the future.
Your 30s is a great time of life to learn and experiment with investing. Investing carries more risk than the guaranteed returns of a savings account or term deposit, but it also carries the possibility of getting a higher reward for your efforts. Providing your investments aren’t being relied on to fund a short term or medium term financial goal, they can be an effective way to grow your wealth over the long term. Diversifying your investments is a sensible way to ensure all your money isn’t tied up in one house, or one retirement fund.
Younger investors are commonly advised to invest in growth or high risk investments such as shares, as they have time to ride out market fluctuations. Those nearing retirement are usually advised to stick to guaranteed returns such as those from a savings account or term deposit, or conservative managed funds.
You may be in your 30s and decide you want to start investing for your children’s future too. Whether that’s a regular deposit into a savings account for university fees, or starting off a Sharesies Kids Account for your child’s first car or home. Your children will thank you for it!
Without a partner to create shared financial goals with, it can be overwhelming to make plans. Chat to your friends, colleagues and family members about what their plans are, tips and tricks they use to manage their budget and understand what medium and long-term financial goals might look like for you. You can also seek professional financial advice to help you make a solid plan for your future.
Key priorities should be to pay down high interest debt, focus on medium term financial goals such as a house deposit, and understand and review your Kiwisaver contributions to see if you could use that recent pay rise to contribute a little more to help you retire early. Check your Kiwisaver account and understand if you’re on a conservative or growth plan too – tweaking your investment strategy now can really pay off in 30 years time.
The key to effectively managing your money is communication. Have you shared your individual financial goals and agreed your collective financial goals? Are you in sync with your savings and budget strategy for the year? Being on the same page can help avoid awkward conversations later in the year, or when you need to tap your emergency fund but find you don’t have one.
Your financial goals might include paying down high interest debt, saving for a house deposit, or saving hard for the next 12 months so you can start a family and have a buffer while you’re on a reduced income.
Your 30s is a great time to have ‘big’ conversations. When are you likely to repay your mortgage? What does that mean for when you might retire? How much money will you need for retirement? Is your current Kiwisaver contribution rate going to let you achieve your retirement goals? Planning early on can help you focus on those long-term goals, and have plenty of time to make adjustments as you go.
Prioritising long-term investments in your 30s such as Kiwisaver or investment funds, even if you only have small, regular contributions really does add up over time. The power of compound interest can be life changing when you reach retirement age. See how much your small monthly contribution can grow with an online compound interest calculator. Online investing platforms such as Sharesies and Hatch enable small investors to start investing from as little as $5 per transaction.
Unsure of how to manage your money? You can access free personal finance services or pay for professional personal finance advice.
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