When you step into your 30s, the feeling of adulthood becomes more real than ever before. The feeling primarily stems from the fact that you are sorted in your professional life and have been making a decent living for some years.
This stage also paves the way for individuals considering financial planning for 30s, as they are not only better at managing their personal finance but are on track to reach the critical money milestones in their life. So when you consider financial planning for people in their 30s, ensure that you also plan for these five milestones.
1. Build your Financial Corpus
The 20s came with little commitment towards your financial goals and concentrated more on charting a career. However, life’s objectives changes in the next decade of your life.
A key milestone of financial planning for your 30s is to start making a list of the goals that you wish to reach in your life. Each plan must have a monetary value attached to it as it is an integral aspect of financial planning for the 30s. Once you have this in place, set up a system where you start investing toward building a corpus that will let you achieve these key milestones in life.
At this stage, the money milestones to focus on are building a financial corpus that includes an emergency fund through disciplined investing and saving.
2. Efficiently Manage Existing Debt
You may have accrued significant debt in your 20s. It could be in credit card debt, student loans, car loans, or more.
As you enter the next stage of your life, financial planning for 30s must involve tackling any existing debt efficiently. This means paying off all current monthly installments on time and paying your credit card dues full on every billing cycle.
Credit cards are one financial instrument that can quickly drag you into a debt trap. Ensure that you only use your credit card if you can pay your dues promptly, or you will be liable to pay very high-interest rates on the balance amount due. Also, keep the card utilization balance below 30% of the available limit.
Any default on your payments can hurt your credit profile and overall score. This, in turn, can deter lenders from extending any other type of credit or loans to you in the future.
3. Diversify your Investment Portfolio
For millennials, the mantra today is to start investing early in life. Your first taste of investment comes with deducting Provident Fund from your paycheck.
Financial planning for 30s is the ideal phase in your life when you can explore wealth-creating financial instruments and diversify your investment portfolio. Depending on your risk appetite, you can include a combination of asset classes in your investment portfolio to deliver consistent yet high returns over a defined period. The goal is to achieve a perfect mix that diminishes any possible risks and allows you to achieve both your short- and long-term financial goals with profits.
Any good investment portfolio will have a combination of investments in the major asset classes. Drawing a fine line between crowding and diversification is what financial planning for 30s involves. In case of possible risks, you should be able to mitigate them by adapting any diminishing returns of a specific asset class against increasing returns from another.
4. Start Saving for Retirement
When you begin financial planning for 30s for your second innings in life, the perfect retirement plan enables you to start investing early and roll it over 30 and 40 years.
You can create a fixed and steady income for your retirement years with the power of compounding. Moreover, you can also counter the effects of inflation, tackle unforeseen expenses, maintain your current lifestyle by investing from an early age, and build a significant corpus.
Peace of mind is almost guaranteed when you know that the corpus that you build is liquid and can be easily accessed when needed. Moreover, it will ensure that you can withdraw funds instantly for unplanned emergencies, which is extremely important.
5. Get Your Insurance in Line
When it comes to financial planning for 30s, getting insured should be one of the critical money milestones on your list of priorities for this stage of your life.
Being insured includes getting the appropriate health coverage that can offset significant medical expenditures for your loved ones and you. Getting accident insurance is a smart move, too, as it covers you in case of partial or total disablement or even death due to an accident.
Investing a term life insurance as part of your overall financial planning for 30s will ensure that you build a corpus for the future at affordable annual premiums. In addition, it offers life cover for the policyholder and financial security for your family.
It can be a wake-up call for you financially when you enter your 30s. It can get overwhelming when you start the process of financial planning for 30s and figuring out how to best reach your money milestones in the next 10 years. Getting your plan in place as early as possible is best to set you up for success and a stress-free life ahead.
What are the critical life goals for individuals in their 30s?
The primary life goals include owning a home, and a vehicle, getting married, traveling the world, and even saving up for your sunset years.
Why is it important to pay off debt?
Paying off debt ensures that you maintain a credit profile and rating that enables you to access various loans in the future.
Why is smart investing necessary to plan your retirement?
Retirement should revolve around pursuing everything you’ve wanted to do all your life. Hence, the objective of building a corpus that enables you to meet your retirement life goals can only happen if you plan your savings with some intelligent investing.