Ah, your 30s. You’ve made it. You have a drawer full of Tupperware and your carbs have been replaced by cauliflower. You’re a responsible adult and ready to take charge of your career and your finances.
Make sure you have your money working for you while you are working—no, grinding—for your money. It’s only fair. Your brain gets super pre-occupied while you’re in your 30s; you’ll tend to think more in micro than macro terms, taking it day to day. Don’t forsake one for the other.
Make sure you keep your eyes on the prize (the most likely reward: a sweet retirement). Step back and look at the Big Picture. And remember this one takeaway: the quaint notion that you can accomplish your goals by savings alone is just that—quaint. You’re going to need to get schooled about how to build wealth in your 30s. Not later; now.
How does the idea of retiring at the still relatively young age of 67 sound to you? But listen up: you’re going to need to save at least three times the salary you earn by age 40. Intimidating, yes, but not impossible.
Take a lesson from your fellow Americans, who can barely afford the short-term, let alone the long term. Recent statistics reveal that, for a majority of Americans, even something as basic as emergency savings, is nothing but a pipe dream. Fifty-five percent of all Americans don’t have the savings needed to cover six months worth of living expenses.
In addition, 38% of U.S. adults claim they have less than $1,000 in the bank. Even the 27% of Americans who do manage to save $10,000 are in for some possible heartache: that won’t even cover six months of being out of work. How do you figure into these statistics? You certainly don’t want to live this way in your 30s and beyond.
We’re certainly not trying to scare you (in fact, we’re going to offer some strategies to build wealth in your 30s), but first, consider this even more alarming stat: 40% of Americans can’t cover a $400 emergency expense . That’s four in 10 Americans.
The Federal Reserve Board says that those who don’t have the cash on hand say they would have to cover the emergency by borrowing or selling something. We don’t want anyone spending even a moment of their lives in this condition, especially not in their golden years.
A Game Plan for Investing in Your 30s
Set up a Rainy Day Fund
One of the biggest lessons you’ll learn in your 30s is that life doesn’t always go as planned. It’s important to have a nice, soft cushion of cash to land on, should any bad news come your way: a job loss, a medical emergency, a car repair.
Not having the money for these unexpected unpleasantries, or putting them on your credit card, may only set you back further from investing in your 30s. The most agreed-upon plan is to sock away at least three-to-six months’ worth of savings that can cover your everyday expenses, from rent on down.
Pump Up Your 401(k)
If you have a regular job and your company offers a 401(k) plan, you should consider it an opportunity to save for your future while potentially reducing your current taxes. This is especially true if your employer offers a match (though matching is typically only offered if you contribute a certain amount).
Consider your match free money, and take full advantage of it if possible. We know this seems tough; you have bills and other obligations, and you want to live your life now. Good habits start early, though.
Get used to increasing your contributions on a regular basis. This could be once a year or twice a year, and especially whenever you get a bonus or a raise. If you are able, do this automatically, online, at certain pre-decided intervals. Simply clicking a button will save you the agony of reconsidering or, worse, changing your mind.
Consider Other Retirement Funds
You may be more entrepreneurial and not have a regular job with a boss. If so, a 401(k) may not be available to you. Instead, there are other options that can help fund your future and help you build wealth in your 30s. Even if you contribute to a 401(k), these additional options may be beneficial to you based on your income and how much you plan on saving.
A Roth IRA lets you contribute post-tax income (that means you can’t write it off) up to a certain amount each year. You can withdraw these funds starting at 59 ½. There are other forms of individual retirement accounts that may be right for you too.
Open a Health Savings Account (HSA)
For those who qualify, this is a personal savings account that can help you save money on those medical situations that may often cost you “out of pocket.” These could include doctor’s office visits, buying a good pair of glasses, dental care, and prescriptions. What do you get out of this? More control (avoiding big and unpleasant surprises in your budget).
The money you save is pre-tax, and specifically meant for future medical expenses. Any growth you earn in the HSA is usually tax-free, which means you don’t pay taxes on the growth. Also, you don’t have to pay taxes on any money you withdraw from your HSA , as long as it’s for a qualified medical expense.
Give Yourself Goals
Rather than put that next Carribean trip or wide-screen TV on a credit card, open a savings account specifically dedicated to your specific, near-future goals. Calculate how much you will need for each goal, and add to that account on a daily, weekly, or monthly basis.
Or you can simply add to the account whenever you can. The result: you are able to pay for that goal in cash. And the money you save in credit card interest can be redirected to your retirement goals instead. Furthermore, the discipline of saving for what you want and need can serve you well over time.
Check Your Risk Level
Hey, life is all about risks—investing is too. Investing is about understanding risk, knowing how much risk you’re prepared to take, and choosing the types of investments that are right for you.
There may be highs and lows over the life of those investments, but the ultimate goal is higher average returns in the long run. What’s your risk tolerance? That’s something you’ll want to explore as you start to build your investment portfolio.
Where Does This Leave You?
Do you think you’re going to have to take on this bear all by yourself? We would never let you do that. SoFi Invest® is an online investment account that can help you start navigating how to build wealth in your 30s. We’ll stay with you until you can finally cash it all in someday and take that world cruise (or whatever floats your boat).
Whether you’re into automated investing or taking a more active investing approach, SoFi members get one-on-one access to financial advisors to answer questions. Our team of credentialed financial planners is here to work with you (over the phone or online, at your convenience), and develop a plan that best suits you. And your goals can change as you and your life change—we’ll be there for that too.
Choose how you want to invest.
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The information provided is not meant to provide investment, tax or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory and automated services offered through SoFi Wealth LLC. An SEC registered investment advisor. SoFi Securities LLC, member FINRA / SIPC .