The vast majority of what we write about here at 40PlusFinace.com is for those over 40 (hence the name) an important topic is what you could do prior to that. I find that I’m reflecting on this more and more as my kids get closer to earning regular wages and establishing a career. Here is my advice to them in their 30s.
While you may have a stable career in your 30s, it can be difficult to build wealth. After you have increased your income, there are additional expenses that you might face, such as saving money for a down payment on a home, dedicating time and resources to a business, or starting a family.
There are some obstacles you’ll need to overcome, but your 30s are actually a great time to start saving and investing for the future.
Key Takeaways:
- Reflect on financial goals in your 30s, and set short-term and long-term targets
- Increase financial literacy through education and research, but be cautious of inaccurate information
- Focus on maintaining a stable income, reducing debt, and building an emergency fund
- Plan for retirement by contributing to employer-sponsored plans and exploring alternative investment options
- Invest wisely, avoiding speculative investments and utilizing strategies like dollar-cost averaging
- Ensure sufficient insurance coverage for health, home, auto, and life insurance to protect wealth
- Explore passive income opportunities and side hustles to supplement income and grow wealth
How Much Net Worth Should a 30-Something Have?
As you move from your 20s into your 30s, you will probably have more income but also more expenses. While net worth may be one metric to look at, here at 40plusfinance.com we focus on cashflow, and assets that product cashflow. With that said, net worth isn’t something that should be ignored necessarily. It still needs to be measured.
Many experts believe that by the time you are 30 years old, your net worth should be half of your gross annual income. Keep half of your income in savings so you have enough money for retirement.
If you’re not where you want to be yet, don’t worry. Saving even a small amount of money each month can lead to significant returns. If you invest $100 a month starting at age 35, Bank of America estimates that you will have saved over $150,000 by age 65, assuming an 8% rate of return.
Our very own financial freedom calculator will give you another look so you can see what age you are track to retire at
We’ve compiled a list of 11 ways to help you build wealth in your 30s.
11 Proven Ways to Build Wealth in Your 30s
The word “wealth” means different things to different people. One person may want to become a self-made real estate mogul, while someone else may be happy with a stable income after they retire.
Below are 11 effective methods for building wealth in your 30s, tailored to fit your specific goals.
1. Reexamine your goals.
Your goals are probably different now than they were in your 20s. When it comes to thinking about buying a home, starting a family, or starting a business, many people are undecided about what they want to do. Turning 30 is a good time to review and update your financial and personal goals to make sure they are still relevant to your life.
If you are married or in a relationship, it is important to include your partner in any financial planning or decision-making. Even if you and your partner are very compatible, there will be times when you want different things.
The biggest thing here is to have a set of financial goals, including 10 year, 3-5 year, and 1 year goals. Don’t worry about always hitting them strictly, but they will get you moving in the right direction.
2. Educate yourself about money.
In order to make any big changes in our lives, we need to start by changing our mindset.
Robert Kiyosaki, said that everyone has the ability to build a financial ark to survive and flourish in the future. Robert Kiyosaki is the business magnate and author of Rich Dad, Poor Dad. You cannot just focus on making money, you must take the time to learn about finances to ensure a stable future.
In order to build wealth, you need to invest time in learning about financial matters. Become familiar with essential terms like income, expenses, net worth, return on investment, passive income, and financial independence. These terms will help you understand your financial situation and make better decisions about your money.
Read books, listen to podcasts and interviews, take courses, and follow financial education blogs to improve your financial literacy like 40PlusFinance.com (shameless plug)
You should always be learning about finances, just like you should be continually learning in every other area. Never stop learning.
But a word of caution is important here. The increased availability of financial information means that there is more inaccurate information than ever before.
3. Get a regular income source.
When you don’t have a regular source of income, it’s difficult to amass wealth. You need both a regular income and savings to invest.
This means that people cannot create lasting wealth from pyramid schemes, fraudulent investment schemes, or gambling.
You should ignore people who are promoting get-rich-quick schemes that say you can build wealth by only working three hours a week. Sustainable wealth is created by taking a long-term approach to value creation. If you don’t create value that people are willing to pay for, you can’t create sustainable wealth.
Get a good job if you don’t have one, and keep your job if you do.
If you are a small business owner, you should focus on creating more long-term value. “You can only become wealthy by adding value,” said Brian Tracy, an expert on self-development. This means creating a business model that can produce more, better, cheaper, faster, and easier than anyone else.
4. Create a budget.
A budget is essential if you want to learn how to build wealth from scratch.
You will need to create a budget that you can stick to in order to take control of your spending. This budget is typically set on a monthly basis.
A budget is a financial plan that estimates income and expenditures for a defined period of time.
A monthly budget is necessary for every household and/or individual to track their expected income and estimated spending. Not having a budget is like sailing without a compass and you will definitely make financial mistakes.
A popular budgeting technique is the 50:30:20 rule. In this technique, you can formulate a budget where 50% of income goes to essential expenses, 30% to non-essentials, and 20% to savings and investments.
This shouldn’t be your entire focus, but it’s important to make and stick to a budget. Trust me, the alternative isn’t pretty and can lead you to need to do a financial reset.
Why is budgeting important?
A primary motivator for gaining an understanding of your spending is that it makes it easier to find places where you can reduce your expenses. If you can lower your costs, you will have more money available to save and invest.
By finding and cutting out wasteful spending, you can save money and grow your wealth more quickly. It’s that simple.
5. Continue to reduce debt.
It is important to focus on paying off debt that has a high interest rate, such as credit card debt. follow your budgeted repayment plans for your credit cards and don’t spend more than you have budgeted You will not become wealthy by paying off one credit card while increasing the balance on another.
Living beneath your means is one good technique for building your wealth. The goal in your 30s should be to get out of debt as soon as possible. A great way to save money is to cut your expenses and use the extra cash to pay off your debt quickly.
Try swapping out your foreign vacations for cheaper weekend trips to places near you. Instead of leasing a car or buying a new one every few years, see how many miles you can rack up on the odometer with your mechanic’s help.
However, don’t fall into the trap of thinking you have to be extremely frugal and not enjoy life. There is a fine line here, but you need to live your life as well.
6. Maintain an emergency fund.
If you have not already set up an emergency fund, you should do so now. Add money to it regularly to make sure you have enough saved up in case of an unexpected event. Many people find themselves in debt because of unexpected life events. Going into debt to pay for things like medical bills, car repairs, or living expenses can be a big financial stressor. Building an emergency fund is important for your financial wellbeing.
A general suggestion from is to have 3 to 6 months of income saved in an emergency fund, which would be available if needed.
Now where you keep those funds is another topic in and of itself, but my best suggestion is to keep them in a cash-value life insurance policy.
7. Focus on retirement planning.
The Pew Research Center says that more than half of adults aged 55 or over have retired. When you’re in your 30s, it’s time to start taking your financial security during retirement seriously, as you’re only a few decades away from retirement.
If you want to get the most money possible from your employer’s retirement plan, try to contribute enough each year to your 401(k) or other employer-sponsored plan to get the full match from your employer. Your employer contributing to your retirement plan is like finding free money, and more, because the savings are tax-advantaged.
Even if your employer offers a retirement plan, you can open an individual retirement account (IRA) or Roth IRA to supplement your retirement savings.
There are two different school of thoughts when it comes to retirement planning. Some people believe that saving is the key to a successful retirement, while others believe that investing is a better way to prepare for retirement. If you have a large amount of savings, you may want to convert a retirement plan into a self-directed individual retirement account (SDIRA). An SDIRA is a retirement account that allows you to invest in alternative investments, and any net income generated is still tax free until you begin to make withdrawals in retirement.
However, my best advice is to buy cash flowing real estate assets until you are at least financially free. Ideally this will take you only 10 years, but could take a bit longer.
8. Avoid speculative investments.
Although it may be slightly nerve-wracking, taking some investment risks in your 30s is usually okay because you will have time to recover before you reach retirement age. Do not invest all of your money into something that has not been proven to work and has the potential to not work out. A good rule to follow is to invest in safe, basic options rather than high-risk ones.
As a way to reduce investment risk, dollar-cost averaging can be used. This involves making investments at regular intervals, without concerning oneself with which direction the market is moving. An investment strategy that helps you resist the temptation to try and predict the ups and downs of the stock market is a smart move, something that should be left to the experts on Wall Street.
A smart way to invest is to put some money into real estate. Publicly traded REITs offer exposure to a range of real estate types, while crowdfunding provides an opportunity to invest money.
A great book on the topic of investing vs speculating is “What I learned when I lost $1 Million Dollars” by Jim Paul & Brendan Moynihan.
9. Have enough insurance.
Insurance is an important item to have in your budget. Insurance protects you from losing a lot of money if something bad happens.
You should have health insurance so you don’t have to pay a lot of money if you get sick. If you do not have health insurance, research and compare health insurance plans in the UAE and choose the one that is best for you.
You should consider getting homeowner and auto insurance if you own a home and a car. If you have kids and dependent relatives, you should subscribe to term life insurance.
It’s great to have wealth, but it’ll be extremely painful if you lose it to something unexpected happening. It is advisable to take proactive measures to insure valuables.
One of the most valuable kinds of insurance you can get is life insurance. Term, whole, universal life is a big topic. Personally I like a mix of whole life plus term in order to have a place to store your money as well as insuring against the unfortunate.
10. Improve your skill set.
There are two ways to save money: by cutting costs or by making more money. Even though a lot of goldfish financial advisors focus on the first option, the second one deserves just as much focus if not more.
If you’re looking to improve your skillset and advance your career, taking professional courses and investing in continuous career development are great options. You can improve your job prospects and earnings by developing both hard and soft skills.
If you are a small business owner, it is important to improve your understanding of the market, commit more resources to innovation, and provide more value to your customers. This will help your business succeed. This will help you to expand your customer base and generate more income.
11. Explore passive income ideas
Apart from earning more money from your job or business, you should look into ways of earning passive income.
Income that does not require your continuous presence or labor is considered passive income. This is in contrast to income from a job or business, which generally requires active work in order to earn money.
Passive income is crucial for those of us who are trying to build wealth from scratch. If you don’t find a way to make money while you sleep, you’ll have to work until you die, as Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, famously said.
There are two types of passive income: “investment passive income” (where your money does all the work) and “non-investment passive income” (where you do some work on the side). The later is what I commonly refer to as a side hustle and is a great way to supplement your income. Here are a few side hustle ideas to get you started.
There are plenty of opportunities to make extra money in today’s global and digital economy. Even though there are many opportunities to make money in different ways, be careful of sites and proposals that promise quick and easy wealth.
A major focus that I recommend is passive income through acquiring real estate assets. Each asset starts to kick-off cashflow and you push the cashflow into your next investment with the snowball of passive income slowly growing.
Closing thoughts
Saving money by spending less than you earn is an essential money habit to develop, and something investors in every age group can do. It’s especially important in your 30s. The years in which you earn the most money are the best years to save and invest money so that you can become wealthy. You should also try to create multiple sources of income. If you keep your eye on your goals, you will be successful in the end, even though it may be difficult for now.
What about you, the reader? Any additional thoughts on building wealth in your 30s?
Kurt has gone from the financial lows of the ’08 financial crisis to personal financial success. He is a professional real estate investor, media buyer, faithful Red Sox Fan.
One of his passions is financial education and the pursuit of financial freedom.
You can learn more about Kurt here, or get a hold of him on Facebook or Twitter.
