5 Min Read
You’ve reached the big three-o, and it’s time to reflect on your personal financial position. Your thirties are filled with opportunities as your career progresses, and you’re more settled in your expenses.
It also happens to be the perfect time to cement those financial goals, especially considering that financial pundits recommend you have your annual income saved towards retirement. (Don’t panic.)
But let’s look at some reasonable financial goals you can commit to at this stage in the game.
Financial Goals For Young Adults
1. Establish (and Stick to) a Financial Plan
You need to know more about your income and expenses than a mere guesstimate. Your after-tax income has the ability to open a number of financial doors for you, but only if you know where each one of those hard-earned dollars goes. The simplest way to do that is by learning how to make a budget and establishing one. A budget allows you to note your income and expenses in detail. Your budget should include:
- Your after-tax income
- Fixed expenses
- An allowance for variable expenses
- Savings and investments (which includes retirement)
- Fun money
A financial plan should also include long-term financial goals that you wish to accomplish, for instance, saving up for that Eurotrip or a down payment on a house.
Apps like Monorail offer savings Tracks for your money goals which can be an easy way to see, and be a reminder for, what you’re saving for.
2. Have an Emergency Fund in Place
Three to six months’ worth of expenses is a great ballpark figure to set aside for a rainy day. Your emergency savings should be in an easily accessible savings account that earns you some interest. When disaster strikes, you don’t want the hassles of penalties for accessing your funds or a waiting period before you can access them. Your emergency savings should have the following qualities:
- Accessible with 24-hour notice or less
- Separate from your main transaction account so you don’t accidentally use it
- Interest earning
- Held by a financial institution that is member FDIC
The pandemic has shown that anything can happen. It's important to determine how much you should save a month and be prepared. Three to six months’ worth of funds is a reasonable base, those who can afford to should consider extending these savings to twelve months.
3. Do G.O.O.D (Get Out of Debt)
Your thirties are where you want to squash those remaining student loans and get that credit card under control. This is your opportunity to free up some cash flow and peak out your credit score. To pay off debt fast, you can use one of several methods such as the Snowball or Avalanche techniques.
Some of the steps you can take to make this a little easier include:
- Know the balances, installments, and end dates of each debt product
- Find out whether there are early payment penalties
- Know the cost of credit, which includes monthly service fees and your interest rate
- Determine whether you want to pay off the smallest debt first and work your way up the ladder (Snowball) or tackle the highest interest item first (Avalanche).
Getting out of debt is worth the effort. A simple $100,000 loan over 60 months at a rate of 4.5% will cost you nearly $12,000 just in interest. Imagine what that $12,000 could do if added to a long-term investment instead?
4. Get Your Retirement Wheels Spinning
If your employer matches your 401(k) contributions, that is essentially money for nothing. Make sure to take full advantage of this as quickly as possible, as the more you contribute, the more your employer contributes (up to their specified threshold, of course).
Once you’ve maxed out your 401(k), it’s time to look into Roth or traditional IRAs. Throwing money at retirement savings helps you prepare for the future while taking full advantage of the tax benefits offered on these products. Be sure to stay up to date with the retirement product rules and thresholds to avoid penalties.
5. Max Out Your Active Income
Your ability to earn an income is one of your greatest assets as it allows you to determine your financial trajectory. For instance, how much you can save, how quickly you can pay off debt, or whether you need debt at all. This means climbing up the corporate ladder or boosting your business’s profitability while you still have the energy to do it.
6. Protect Your Finances
No one wants to talk about this, but it’s important to plan for unforeseen events, such as death or losing the ability to earn an income. It’s important to have the necessary paperwork and insurance in place to make sure your estate is protected. Consider the following:
- Life insurance (whole life or term)
- Income protectors
- Last will and testament
- The appointment of an executor
- Health insurance
7. Build a Financial Legacy for Future Generations
A financial legacy equips future generations to build on their financial future from early on. For instance, by simply saving up for your child’s education, you equip them with the means to earn their qualifications without the burden of a student loan. Or perhaps you can help them with a down payment for their first property or car. This means freeing up their finances to focus on wealth creation instead.
Creating Realistic Financial Goals
You’re at the cusp of creating a great financial future, and it all hinges on the ability to create realistic financial goals. It’s not too late to start getting it together!
With an app like Monorail you can set a shopping allowance and create savings Tracks for your goals.
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