Financial Planning through the Ages – Top Tips for Thirty Somethings

Financial Planning through the Ages – Top Tips for Thirty Somethings

FP 30 Somethings1. Save for Retirement.  Longer life expectancies and less governmental assistance means you’ll need a pretty large nest egg to provide for decades you may spend in retirement.  So what’s the good news?  In your thirties you have time and compound interest on your side which means if you start now you can make saving easier over the rest of your lifetime.  Consider this:  If you save $1,000 per month starting at age 30, assuming a 6% return you could save $1.38M by age 65 but if you wait until age 40 to start saving you would need to save more than double each month to save the same amount!

You should aim to save 15% of your pay check to get on track for retirement but if you don’t think it’s possible, you need to take a closer look at how you prioritize your money.   You’ll kick yourself in your forties if you don’t start saving now because you’ll likely need to save twice as much per month to catch up and have to save twice as much at a time when family needs and expenses are typically at their peak.

2. Create Back-Up Plan for Family.  You need to be sure that your loved ones are cared for in case you aren’t around so it’s time to get life insurance and an estate plan.  Term life insurance to replace your income during your working years is quite affordable in your thirties.   While an estate plan is likely to cost you a few thousand dollars, it’s vital to carry out your wishes and nominate guardians if you aren’t there to care for your family and protect you if you become incapacitated.

3. Schedule Family Financial Life Meetings Your thirties is a great time to get into the habit of regularly reviewing your financial picture and your goals.   This regular meeting is even more important if you’re married because no two people have the same views on how to best use resources to meet your goals and allows you to get on the same page.   You’ll want to map out your short-term goals (e.g., car repair, travel costs to friend’s wedding), mid-term goals (buying a home, large trip) and long-term goals (retirement and college funding) and track your progress in writing so you can monitor your progress each meeting.   Let us know if you would like to participate in an upcoming workshop or are interested in our downloadable family financial meeting agenda.

4. Align Your Resources To Your Goals.  A budget doesn’t limit you; it allows you to use your resources for what’s important to you.  One budgeting tool we like is to break up your income into three categories with 50% allocated to needs (housing, transportation, food), 30% allocated to wants (cable, vacations, dinners out) and 20% allocated to meeting your financial priorities (saving for retirement, paying down debt, creating an emergency fund).   You choose what you spend within each bucket but the key is to spend only what you have allocated to each bucket.  For more on this budgeting technique, click here.  To see if your spending falls within the 50/30/20 method, you’ll need to track expenses, discussed next.
 
5. Track Expenses.   To align your resources to your goals, you need to know where your money goes each month.   You can download Beacon Pointe’s expense worksheet to get started or use technology to track your expenses over time.   Mint.com is a popular budgeting website that categorizes your spending on credit cards or you can track as you spend by noting daily spending on the notes function of your smartphone or consider a popular app such as Ace Budget to track and categorize expenses.

6. Create an Emergency Fund.  Unexpected emergencies arise and you want to cover them without charging up your credit card or relying on family.   A good rule of thumb is that you should have enough cash reserves to cover three to six months of expenses.

7. Check Your Credit.    If your credit score is low, lenders, insurers or employers view you as less reliable so you’ll pay more to borrow or get insurance and could even be passed over for a job.   For information on how to request your credit reports and understand and improve you score, click here.

8. Keep Debt in Check.   While saving for retirement is important, paying off credit card debt makes more financial sense and can even save you money by improving your credit.   Before you save for retirement, use funds from the 20% of your income bucket allocated for savings to pay down your highest interest rate card first then paying off cards charging lower interest rates.  Once your cards are paid off, only charge what you are able to afford to pay off each month which shouldn’t be a problem as long as you stick to your budget.  If you have student loans, split your savings resources between paying of student loan debt and saving for your retirement.  Just be sure to make student loan payments and speak with your lender if you are having difficulties in making payments.  For information on options in repaying federal student loans, click here.

9. Learn About Investing.   Now that you are starting to save you need to learn the basics of investing.  You should know how to evaluate your investment performance and determine whether your asset allocation fits your needs.   Let us know if you would like to participate in a basics of investing workshop or want us to take a second look at how you’ve structured your investments.

Disclaimer: This has been provided for informational purposes only and should not be considered as investment advice or as a recommendation. Beacon Pointe does not endorse and is not responsible for the content, product, or services of other third party sites or references. Beacon Pointe does not offer legal or tax advice.  Private legal counsel alone may be responsible and relied upon for these purposes. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. CIRCULAR 230 NOTICE:  To ensure compliance with requirements imposed by the IRS, this notice is to inform you that any tax advice included in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of avoiding any federal tax penalty or promoting, marketing, or recommending to another party any transaction or matter.

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