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If you are in your 30’s, then hopefully you’ve gotten all the angst and financial irresponsibility out of your system while you were in your 20’s. I mean, that’s what your 20’s are there for, right?. To survive and learn from all the mistakes you’ve made while you are still trying to figure out who you are and what you want out of life.
Being in your 30’s is a whole new different animal. I am still trying to figure out who I am and what I want in life, but I became even more serious when it came to my finances. I am still making mistakes but I am also avoiding making the same ones.
I think something happens to a person’s psyche when they turn 30. They start becoming more financially responsible or at least know that they have too. If you want to become more financially stable but just don’t know where to start, I have 5 tips below that will help guide you. The party is just getting started.
Have an 8 Month Emergency Fund
If you don’t have an 8 month emergency fund yet, you really need to have one in place. To figure out how much you need is very simple. Just take every required expense you have per month like rent and food and add it up. Take the total amount and multiply it by 8. That is how much you need in your 8 month emergency fund.
Eight months is the magic number because if you lose your job, that is how long it takes on average for someone to find a comparable paying job. Read more about it here
You need to have your emergency fund in a place where you can access it quickly and where it is 100% safe. So this money should not be in the stock market or under your bedroom mattress. I keep my emergency fund in CIT Bank. It is an online bank that pays one of the highest interest rates around. It is FDIC insured up to $250K. Click here to open your account for free.
Start Maxing Out Your Retirement Accounts
It can never be too early to open and fund your retirement accounts. Hopefully you have already done this while you were in your 20’s, either through an employer retirement account like a 401K or you opened your own ROTH IRA. For extra credit, you should open and fully fund both if you qualify.
The longer you wait, the less time you will have for your money to compound, grow and work hard for you. As they say, ‘Time is Money’.
If you already have a retirement account, start contributing more every month if you can. Contribute up to the maximum amount. I like to invest in Index Funds within my retirement accounts. Read more about it here.
Get Completely Out of Credit Card Debt
I view credit card debt like I do smoking cigarettes. It’s just plain old bad for you. If you are in your 30’s, you really need to start digging yourself out of your credit card debts. It wasn’t even that cute on you in your 20’s. Now it looks worse on you in your 30’s. Credit card debt is just bad debt.
If you are paying the high interest rates on your credit card bills every month, it will severely hamper your ability to save money and invest it in your retirement accounts. So the faster you pay off your credit card debts, the faster you can start building wealth. Click here to get more info on debt consolidation.
You also need to start improving your credit score while you’re in your 30’s. The rate you get on a mortgage and car loan greatly depends on your FICO score. The better your score, the better rate you get and vice versa. Some employers may even check on a candidate’s credit score before offering them a job. Click here to learn how to improve your credit score.
Buy a Home
If you’ve been dreaming about buying a home, now is the best time to do it. Interest rates are likely to go up over time so if you need a mortgage, go for it. But you will first need to have a 20% down payment, a good credit score, a stable job and I would have at least an 8 month emergency fund. If you don’t have all of these things, then I would not buy a home.
If you are not sure you can afford the monthly payments, then I would recommend you play ‘house’. Pretend that you are already living in the house you are interested in buying. Every month, take all the payments that you would have if you owned the house out of your paycheck. This includes the mortgage, insurance, common charges, taxes, electricity bill, HOA fees, etc. Put that money in your emergency fund.
Now see how you feel. Do you have enough money left over every month to buy food and other things you usually do? Or enough to save money or go on a vacation? The purpose of this exercise is for you to feel firsthand what it would be like if you owned that house. If you are comfortable with your new monthly payments, then I say go for it. If not, aren’t you glad you found out before you went ahead and bought the house.
The faster you buy a home, the faster you can start building equity on it. But there is nothing wrong with renting, especially if you got a steal of a deal on your place. If that is the case, most people would be better off continuing to rent then buying a home.
Click here to learn about the true costs of home ownership.
Invest More Money
After you have fully funded your 8 month emergency fund and you’re contributing to your retirement accounts and you don’t have any credit card debts, then you should invest some of your money. If you don’t know what to invest in, I highly recommend looking into Robo Investing. It is a passive investing vehicle where an algorithm essentially does all the work for you. Click here to learn more about it.
If you want to invest in individual stocks, I highly recommend using Ally Invest. They charge only $4.95 per trade and it is free to sign up. I think it is the best deal in town when it comes to individual stock investing. Click here to learn more about investing.
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