Your 30s bring about significant changes in your life. Odds are you are now married or in a committed relationship, and you probably have kids or are at least thinking about it. Along with a person to share your life with and a child or children to raise, your priorities shift, and so do your finances.
There are many parts of your financial situation you need to examine and change during this decade, especially retirement. Here are some tips to improve your retirement savings in your 30s.
Adjust your budget
The first step in improving your retirement savings is adjusting your budget. Your budget is your financial playbook, and it needs to be accurate and optimized to improve your finances. Your 30s will bring about increased and new expenses that need planning for. You probably bought a house and now have a mortgage. If you have a child, you will need to start saving for their education. You are also further into your career, which means, you are probably making more money. More money means more available for savings.
There are a few areas for savings that will need some ramping up. First, your emergency savings needs a little bit of a boost. By now, you probably have a few people that you provide for as well as more stuff. You have a spouse or a child that could go to the ER or a water heater that could crap out on you. Time to increase your emergency savings to account for those possibilities.
You are also a little closer to retirement so it's time to increase your retirement contributions. Hopefully, you have been increasing your contribution percentage slowly throughout the years, but if you haven't, it's time to start. If you currently contribute 10% and money is a little tight, try increasing it a little to 11%. If you are able to swing it, give it a few months or a year, after which you won't even notice the reduction in income, and can then try another one percent increase. If money isn't tight and you can contribute more, what are you waiting for?!
Pay off debts
Hopefully, by your 30s you've made significant progress in the debt department. You've had at least a decade to work down your credit card and student loan debt. If you are fighting a losing battle in this area, it's time to get a handle on it. Here is an article I wrote last year about refinancing student loans.
Regarding your credit card debt, there are a few options you have at your disposal for paying them off.
First, a balance transfer to an interest-free credit card. There are some companies that offer 0% interest on transfer for a certain number of months. Some of them last as long as 21 months!
Next, a personal loan. This may not be an option for everyone, however. The viability of this option all depends on your current interest rate and the interest rate on your loan. The better your credit, the better your interest rate will be.
Last, a credit card payoff plan. There are two options here:
Snowball method - With this option you pay off the card with the smallest balance first. You pay the minimum to all your other cards and put every cent available towards the smallest balance. Once you pay off that card, you take the money you were using to pay it off and put it towards the next smallest balance.
Debt avalanche method - With this option, you pay off the card with the highest interest rate first. Like the last method, you pay the minimum to all of your other cards, but now you pay as much as you can towards the card with the highest interest rate. Once you pay that card off, you put the money you were paying towards it to the card with the next highest interest rate.
Your 30s is a great time to develop an investment strategy. Now "investment strategy" may sound intimidating, but it really winds down to just two things, diversify and minimize expenses. When investing, your goal is to get the most return for the amount of risk you are comfortable with. You have 20 to 40 years in the workforce remaining, so you can probably keep your risk profile from your 20s (more stocks than bonds). Your investments should focus on three areas, domestic stock fund, international stock fund, and a bond fund. Determine your risk tolerance and your time horizon, then allocate your assets to those three funds accordingly.
Keep your fees and expenses low. As Benjamin Franklin said, "a small leak will sink a great ship." Meaning, fees can kill your retirement savings.
Open a Roth IRA
I mentioned this in the last post about your 20s, but you need to set up a Roth IRA. Even if you can only contribute enough to get the match at your workplace retirement plan, I still advise you to open a Roth IRA and contribute a little. Having a tax-free source of income during retirement will benefit you, by offsetting the fully taxable monies from your employer-sponsored retirement plan.
Communicate with your spouse about money
You and your spouse, or significant other, need to be on the same page. Talk to them in detail about your finances, you should revisit and have these discussions regularly. Go into specifics about your retirement and the life you envision when that time comes. Talk about your goals and where you are on the journey of meeting those goals. Discuss where you can cut expenses and make improvements to your finances.
Adjust insurance coverage
The type of insurance coverage you have in your 30s is extremely important. By now, you probably have a house and a car, or two, that need coverage. You probably have a person or persons that rely on you to provide for them, making life insurance and the amount of coverage you have very important. Regularly review your insurance coverages, and I strongly recommend working with an insurance agent to help you with all of your coverages.
Write your will
Like previous sections in this post, due to your probability of having one or more people that depend on you and your accumulation of stuff and things, it's time to do a little estate planning. If something were to happen to you, you have to have a plan in place. A will highlights where your assets transfer in the event of your unexpected passing, it also highlights what happens to your children if both you and your spouse pass away. Having a detailed and organized will is extremely important in terms of retaining your assets and making sure your children are well taken care of.
Ask a professional
It is always a good idea to get a professional opinion on financial matters. Talk to a financial professional about your retirement savings and your investments. They should be able to design a plan for you so you invest wisely, and are able to meet your retirement and other financial goals. Here is an article I wrote on how to choose a financial professional.
Planning for retirement gets a little more challenging and a little more nuanced the older we get. We accumulate more things, we have kids, and our careers advance or change. Use this tips in order to plan for retirement effectively while also adjusting to life's new phases.