Are you in your thirties? Do you think you have gotten it all figured out financially? Well, here are some areas that people in their thirties need to consider and can lead to some mistakes later on in life. Most of us spent our twenties not thinking of our future and the future of our families. And yes most people in their twenties are just getting out of college and starting their first real jobs or careers. But the following are some areas that everyone in their late twenties and into their thirties needs to consider before it is too late.
The first area that needs to be addressed is saving too much in the wrong places. While I am an unyielding advocate of saving as much as you can for retirement and a huge fan of 401(k) plans and ROTH IRA’s, there are other things that need savings as well. No matter what though always save up to the point where there is no company match being left on the table as you never want to give away money. So what other things require saving that may be as important as retirement you may ask? Well housing, a child’s education or on a fun note vacations. Never forget to have some fun but always pay yourself first in planning for your retirement. One tip for this is to set up multiple savings accounts for each thing that is requiring you to save in addition to your retirement accounts.
And speaking of retirement and a child’s education you need to realize that your retirement needs always to take priority over a child’s education. Now that may seem harsh or even cruel but let’s face it your retirement is number one as your earning potential is much more limited than that of a child’s. Save for a comfortable retirement and if you have any excess funding left over then use that to fund a child’s education. The best way to save for a child or grandchild’s education is a state sponsored 529 plan. These work similar to an IRA growing tax-deferred and are tax-free provided that they are used for approved educational expenses.
When we are in our thirties, we tend to neglect insurance and that is something that should never be done. Health insurance is becoming mandatory due to the Affordable Care Act, so that is not as much an issue as it was in the past. Now disability and life insurance are areas that need everyone’s attention. Most people in their thirties do not think about becoming disabled or even worse their death. But life insurance can be crucial in your thirties as term policies can provide large death benefits for small premiums. As we get older, these policies become extremely expensive and in most instances not affordable at all. If you plan accordingly and get a 30-year term policy in your mid to late thirties that should take you right up to your retirement. And you can add or drop term policies to cover expenses for certain periods of your life such as a child’s education or a mortgage.
An insurance I alluded to earlier is a long-term disability. This is one that most of us never really consider when we are working unless the company we are working for pays the premiums. In those instances, the payout you receive in the event you become disabled is taxable. If you pay the premiums yourself, the payouts are considered tax free, so there is that always to consider as well. And according to social security about 25% of the 20-year-olds will become disabled before they reach retirement age. So this is an insurance that is not to be messed around with and one that you seriously need to consider. But like most insurance policies it can be complicated so seek the advice of a professional before you buy a disability policy.
Many people in their thirties are getting married for the first time. And like most of us, you want a dream wedding for you and your future spouse. The problem here is that a wedding is beginning to average over $25,000 and that is a lot of money for a young family just starting out. Instead of having the large wedding have a smaller more manageable wedding and use the difference for a down payment for you and your spouse’s first house. But if the big fancy wedding is your desire do not downsize because of this post. Have your dream wedding but be prepared for the consequences of spending such a large sum when it possibly could have been better used somewhere else.
And when that first child does come along do not break the bank on them. Most first-time parents think that they need the latest and greatest things such as strollers, clothes and baby beds. Get what you need and not the top of the line just because it is the latest and greatest. Buy highly rated and safe things for your first child and let the rest take care of itself. Because if you do break the bank Murphy’s Law will kick in, and there will be an unexpected expense that catches you by surprise.
Automobiles are a weakness of not just thirty-year-olds but just about everyone it seems. The problem is cars, as a rule, do nothing but go down in price unless you buy a high-end car that is destined to become a collector’s item. And let’s face it, those cars are extremely expensive and if you are buying one of those I doubt this item or any in this post matter to you in the first place. Buy a good solid car and do not finance it over five years. Then pay it off and drive it for five more years while you continue to save the payment for the replacement car when it comes time to get one. And if you have taken care of the car you may even be able to get a little out of the old one when it comes time to buy the new one. And to save some more money consider buying an off-lease car that can be as much as 30-35% less than a new car and most will still come with a warranty. But no matter what buy something that is affordable and will last you for years to come.
Graduate school is great for some people, but it is not for everyone. If you can pay for school as you go and not stop working, that is the first sign it may be an okay decision for you. But only really consider graduate school if it will have long-term financial benefits that will pay for the additional education expenses. If you want a degree just to have, the degree chances are you do not need to go to graduate school.
And lastly, never assume you will make more money later in your working career. Yes, it is true that in your late thirties and forties you enter the prime of your working years. But that is not a guarantee by any stretch of the imagination. Long gone are the days of people leaving college and having a single job that they stay with for their entire career. In today’s work environment, it is extremely common for people to switch and change jobs on a regular basis.
While your thirties are fun and exciting time, there needs also to be some consideration for your future. These are just some of the areas that people need to consider but this is by no means a complete and comprehensive list. All things are okay when done in moderation so keep that in mind.
If you have any questions or concerns, please feel free to contact me.