People in their 30s often find themselves facing a number of transitions: marriage, children, career advancement, and home buying, to name a few. It’s a stage of life that’s full of challenges, but it can also offer just as many opportunities. You may be enjoying greater income stability than you had in your 20s, but with fewer financial burdens than you’re likely to face later in life. It’s a great point to take advantage of the time value of money and to lay the groundwork for achieving your goals. Here are a few things to think about.
Developing a Financial Plan
A smart first step is sitting down to formulate a financial plan. Having a road map to guide your financial decisions over the short and long term can encourage good habits that may reward you down the line. Each of us has different priorities when it comes to our financial lives, but breaking down our goals into dollars and cents can help anybody reach those goals in a more effective way.
Identifying Financial Goals
A major part of most financial plans is to itemize your short- and long-term goals and to start funding the savings and investment accounts earmarked to pay for those goals. It may be helpful to have different investment accounts established for each goal and to customize your investment strategy accordingly. For example, if you’re currently 30 and planning to buy a home at 36, you can build an after-tax portfolio around your risk tolerance and a 6-year time horizon. Knowing when you’ll need the funds will help guide your investment choices so that your capital isn’t in limbo around the time you need it.
Saving for Retirement
Retirement is likely to be one of the long-term goals that you’re planning for, and your 30s are a great time to save toward that goal. If you have access to a retirement plan at work—such as a 401(k) or 403(b)—that can provide you with a great retirement savings option. Those plans offer pre-tax contributions and tax-deferral of growth and interest generated in the account until the funds are withdrawn. If you’re self-employed, there are IRA plans that you can set up on your own to gain some tax efficiency while saving for your retirement.
Buying a Home
Many people in their 30s are also saving to buy a home. This may be particularly relevant if you have children, or are planning to, or if you’re simply looking to start building home equity. Some people purchase a home later in life—or never at all—but there are some benefits associated with home ownership that are worth discussing. Those benefits include building your equity with each payment you make, taking advantage of leverage (through a mortgage), and getting a tax deduction for your mortgage interest, which can ease the burden of each payment. If home ownership is a priority for you, buying something well within your budget could be helpful in that you can continue to fund your liquid savings and investment accounts that are earmarked for other goals.
Establishing Financial Boundaries
A US News and World Report article on the subject recommends that people in their 30s get comfortable with a budget and be honest about what they can and can’t afford. Many people stretch their spending to the point where it interferes with their ability to save and invest. That sort of behavior could lead to stress and disappointment down the road when you’re scrambling to meet savings goals. Once you have a clear picture of your monthly budget, staying within it will be a key component to accumulating the money you’ll need to fund your goals.
If you’re in your 30s and already focusing on your financial future, that’s a great start. Breaking down formidable financial goals, such as retirement and home ownership, can be overwhelming if you simply ponder the huge sum of money you will need without taking the time to create a reasonable plan. However, if you take baby steps, such as putting a specific amount of money away each month into your investment accounts, letting time and compounding interest provide a tailwind, you can put yourself in a strong financial position heading into future decades.
 Eisenberg, Richard: "A Guide to Self-Employment Retirement Plans." Forbes, January, 2014. http://www.forbes.com/sites/nextavenue/2014/01/22/a-guide-to-self-employment-retirement-plans/
 Palmer, Kimberly: “How to Manage Money in Your 30’s.” US News and World Report. March, 2014.