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How to Manage Your Money in Your 30s
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How to manage your money in Your 30s
It’s time to start saving for retirement and other goals, such as down payments and college savings.
By Kelsey Sheehy Senior Writer | Small business, personal finance Kelsey Sheehy is a senior writer at NerdWallet and a guru on small-scale business. She joined NerdWallet in 2015 and worked for the next six years working as a financial journalist and spokeswoman before shifting gears to cover the financial decisions and challenges that small-business owners face. Kelsey’s articles have appeared in The New York Times, The Washington Post, Nasdaq and MarketWatch among others. She also writes a column about the millennial generation and money for The Associated Press along with some other writers from NerdWallet. Kelsey has appeared as a guest on “Today” talk show NBC News and ABC’s “World News Tonight” and has been quoted by the Los Angeles Times, CNBC, American Banker, NPR and Vice as well as other publications. prior to her joining NerdWallet, Kelsey covered college (and how to finance it) for U.S. News & World Report. She is based in Washington, D.C.
April 25, 2017
Editor: Rick VanderKnyff Senior Assigning Editor | Los Angeles Times; University of California, San Diego; Microsoft Rick VanderKnyff leads NerdWallet’s news operations and manages the team responsible for expanding NerdWallet content to additional topics in personal finance.
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Your 30s can be an exciting, yet challenging decade. While you could be growing your career and making more money, you could also face the financial responsibilities of purchasing a house or having children.
Beyond for you and your family members, experts suggest 30-somethings take these steps to .
Make these money moves and show More
1. Open an IRA
You probably know that it’s important to start saving for retirement and starting early to benefit from compound interest. You might also be aware that if your employer offers an employee retirement plan, then you must make use of it. But beyond that?
You might want to consider investing in a combination of , traditional IRA as well as Roth IRA accounts. (See .)
A good first step is to ensure you receive the full company match on your 401(k), and then to you can open a Roth IRA. The maximum annual contribution will be $6,000 for people who fall within the income limit that are $124,000 (filing as single) and $196,000 (married filing jointly) for 2020, and $125,000 (filing as single) or $198,000 (married filing jointly) for 2021. If you are over the IRA limit, divert your contributions to 401(k).
This option assumes you have a plan sponsored by your company that you can access. If you’re one, create an IRA on your own using the internet-based broker. Robo-advisors such Betterment and Wealthfront use an algorithm to build the account and run it, automatically investing on your behalf based on your age, retirement goals and your risk tolerance. This tolerance should be , when you’re still just a few years away from retirement.
No matter what your plans are regardless of your plan, make sure you contribute the amount you are able to afford and ramp the amount as your income increases — adding a tenth of a percent or two each time you get an increase, with an aim of setting aside 10 percent to 15 percent of your annual earnings to retirement savings.
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2. Prioritize your finances
Make sure your spending is in line with your priorities. In addition to increasing your retirement savings as you make more money, be sure to keep your spending in check.
Don’t fall into the trap of spending more just because you’re earning more. Instead, be intentional about your spending. Work with your partner, if you have one, to decide what is important to you and your family.
To get a quick overview of your spending habits, input your earnings into using the below calculator. NerdWallet suggests allotting 50 percent of your earnings to essentials, 30% to wants and 20 percent to savings.
A certified financial planner will assist in setting up an action plan that takes into consideration your financial needs.
Save for emergencies and goals. Saving should be a prioritization. If you don’t have an emergency savings account, start there.
It may take some time to fully , so work in increments. Start with $500, then $2,000, and eventually make it a goal to fund three to six months ‘ living expenses. This will allow you to focus on other objectives including saving up for a downpayment on an apartment or college if you have kids. It is important to do this as well as saving for retirement.
Make sure you have separate accounts for each goal, recommends Brian McCann, founder of Bootstrap Capital LLC in San Jose, California. Save money online to save money for your down payment, or home repair fund and another one for buying a new car and the final to fund your dream vacation.
” Remember: Your kids can fall back on student loans if necessary; your retirement isn’t. “
Try to kick college savings into gear when you are able to have children, with 529 plans or any other tax-advantaged programs. With an IRA for instance you are able to withdraw money for qualified education expenses without penalty.
As with saving for retirement, the earlier you start, the longer time you have to increase. Therefore, contribute as much as you can without having to sacrifice savings for retirement, in order to get the most mileage out of your savings. Be aware that your children can use student loans if necessary; your retirement savings can’t.
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3. Get disability and life insurance
No one wants to think about the possibility of a catastrophe, but planning for it could make life a little easier in the event of it happening. This is why insurance comes into play.
Most offered by employers pays 60% of your base salary if you’re too unwell or hurt to go back to work. For many, that’s not enough.
Examine your income, current and financial goals for the future to determine what you’ll need, says Tracy St. John, Financial advisor and co-founder of Financial Avenues LLC in Kansas City, Missouri. Take a look at the amount that your current disability plan will pay. If there’s a gapin coverage, look into purchasing an additional plan immediately.
“As you age, it’s going to be more expensive,” she says.
Choose only the coverage that is in line with your budget, but select the plan that permits you to alter coverage as your income increases.
, even if you have insurance through an employer St. John says. Like other policies, life insurance gets only more expensive as you get older.
More information on getting insurance
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About the author: Kelsey Sheehy is a personal finance writer for NerdWallet. Her work has been featured on The New York Times, USA Today, CBS News and The Associated Press.
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