You are never too young, or never too old to properly manage your personal finances. If you have not given a lot of thought to your financial future in your twenties, being thirty is a good place to start. Everyone makes bad financial decisions in their 20s in one way or the other. It is just the natural way of things. That’s how we all learn. However, at 30, you are now older and (hopefully!) wiser. I hope this article will help you improve your savings, build better credit, build your wealth, and create a steady path to a financially secure future.
I like to call myself fairly financially savvy, but there’s a whole lot of things I still have to learn. I was pretty disciplined in my finances as a young executive in my early twenties, right after college. I had my savings down, a wedding fund was in order, and I was spending quite responsibly. My 15-hour workdays and studies rarely allowed me to go out and have fun, which helped.
Then, in my mid-twenties I got a classic quarter-life crisis. I was traveling almost full-time since my job allowed me to work remotely. (Yup, I was doing that before it was cool!) This led me to rapidly burn through my savings and whatever I made on the fancy job that took me places during that time. In my late twenties, I pulled myself together back again. As a thirty-year-old, I have cultivated the financial discipline and work ethic needed to look towards a comfortable and financially secure future.
In this article, I speak of 5 simple yet must-have personal finance habits that I believe everyone needs to have in their thirties. They are pretty straightforward, but I thought you could use a reminder.
Habit #1: 🗣️STICK TO A BUDGET🗣️
Sorry, I didn’t mean to yell in capitals. BUT, not having a budget is a sure-fire way to completely ruin your personal finances, no matter how much you earn. Many people find it difficult to stick to this habit because they create rigid and impractical budgets that are impossible to follow. Your budget should be flexible enough to adjust to your life changes, especially after your 30-year mark.
Your early 30s usually come with several huge financial transformations such as getting married, having kids, and sometimes even divorce from an unsuccessful first marriage. This is also around the time many entrepreneurs are financially secure enough to start their own business, which is another huge financial decision. You need to consider everything when you create your budget. It is a balancing act. Know your priorities and cut unnecessary spending if your spending surpasses your income.
Plan ahead, and be meticulous about where your money goes until you are confident about your financial discipline.
Habit #2: Pay off Your Credit Card in Full Every Month
If you are using a credit card, you need to be religious with your payments. Pay your balance in full on time every month. Racking up consumer debt like unpaid credit card bills in your twenties is a financial blunder many people have to deal with in their twenties. Credit is not evil, but if you are not responsible with it, it can slowly creep in and ruin your financial future altogether. Try not to keep more than two credit cards. Using a credit card is not too different than taking a loan—you are spending money you do not have. Having a stack of credit cards is not something to brag about. They are not worth the late payment fees and sky-high interest payments you are making.
Limit your credit card usage, and always pay your balance in full. Maintaining a good credit score will help you in the next milestones in life such as buying a house, and getting a credit line approved for your new business.
Read More: The Joy of Being a Minimalist
Habit #3: Have a 3-6 Month Emergency Fund
If you have consumer debt like credit cards, have a starter emergency fund that’s about one month’s worth of your income and use the rest of your income to quickly pay off the debt that’s accumulating interest. Then, work on saving about 3-6 months of your living expenses as a full emergency fund.
I prefer to keep a money market account for this so I will not be tempted to spend it in non-emergency situations. Money market accounts are more flexible than fixed deposits, and they give you a better interest than a regular savings account.
The purpose of your emergency fund is to help during an emergency or to keep you and your family afloat until you find new employment if you become unemployed. Do not use it to buy clothes or a fancy tv.
Habit #4: Automate Your Recurring Savings and Expenses
Many people end up paying unnecessary penalties and interest just because they forget to pay certain bills, loans, or other recurring payments on time. With easy and convenient online banking facilities available to you, automating your bill payments is one of the most financially responsible things you can do. Set up standing orders with your salary account to automatically pay any recurring payments. This removes the element of human error that comes with manually paying your bills and other payments with a deadline.
You can also set up a standing order for a certain amount from your salary to be sent to a separate savings account. (20% of your salary would be ideal, but if that doesn’t work for you, something is better than nothing!) This is a good way to build up your emergency fund. Set up the transfer for the day after when your salary hits your account, and pretend the savings account does not exist unless there is an emergency.
Habit #5: Diversify Your Investments
You know the famous Warren Buffet quote, “Do not put all your eggs in one basket”. Diversification is extremely important in your investment portfolio. That way, you are maximizing your returns as well as reducing the amount of risk you are exposed to by putting all your money into one investment opportunity. Stocks are not the only investment opportunity you can consider. Mutual funds and real estate are two of the best ways to diversify your portfolio. I will write a more detailed article on investments later on.
“You must gain control of your money, or the lack of it will forever control you!”