If your 20s are for choosing a life and career path, your 30s are for settling into your chosen path and starting to prepare for your future.
A huge part of preparing for the future is securing your financial position through savvy investment. Your 30s are actually the perfect time to start investing: You’re in your prime earning years, so you have real money coming in, but you also have three or four decades until retirement, which is plenty of time for your investments to grow, even if you have to weather one or two market downturns.
But getting your investments right can be tricky. Even something as common as buying your first home can be a challenge when you’re learning as you go. Not only do you have to find an affordable home that’s also a great investment, you also have to find the right real estate agent, ask them the right questions, and try to pay the lowest commission possible. Get one of these decisions wrong, and you could set yourself back!
Luckily, putting together a wise investment strategy for your 30s is pretty straightforward, once you understand what your goals should be. Read on for our best tips on investing in your 30s!
1. Put together a comprehensive plan
You can’t start your investment journey until you have a roadmap to follow.
Think hard about your investment goals — where do you want to end up, how hard are you willing to work toward that end, and what are your personal resources, both financial and psychological?
A good investment plan is made up of goals that are both doable and specific. The first quality is important because if you set yourself lofty, unattainable goals, you’re setting yourself up for failure, and that bitter aftertaste will make it even harder to try again.
The second quality is important because it’s easier to measure your progress towards specific goals. If you’re just trying to “save a lot of money,” who’s to say if you failed or succeeded? On the other hand, “saving three times your annual salary” is a specific goal that you can meet or exceed.
2. Embrace risk
When you’re investing in your 30s, retirement is decades away, and you have a lot of years to accrue interest or make up for any missteps.
So you should take big swings now, while you still have plenty of time. If you miss on a big investment, or fall victim to a market correction, you can absorb those losses easily. After all, the biggest returns also come with the biggest risks, while the safest investments generally offer the lowest returns.
So what are some high-quality, high-risk investments? If you have a high tolerance for risk, financial experts suggest putting your money into IPOs, high-yield bonds, REITs, or foreign emerging markets (either directly or through an ETF focusing on a certain sector or region).
3. Diversity is good
While investing in your 30s should mean taking some calculated risks, you should still take reasonable measures to protect your investments. The easiest way to do that is to make sure you have a diversified portfolio.
How does diversification protect your portfolio? Well, if your money is spread out among different investments, you’re insulated against a sudden shock in one of the markets.
Let’s say you have all your money in stocks. If the stock market suffers a big hit, your portfolio is going to take a nosedive. But if your money is spread among stocks, bonds, real estate, and cryptocurrency, your net worth is going to take a much smaller hit.
A shortcut to diversification is investing in an ETF, or exchange-traded fund. An ETF is basically a diversified portfolio that you can buy a share of, just like you would a stock.
4. Understand taxable and tax-advantaged accounts
Now that you’ve invested your money, it’s time to think about where you’re going to keep it.
Tax-advantaged accounts offer benefits like tax deductions for contributions, or tax-deferred appreciation. Tax-advantaged accounts include IRAs (traditional and Roth), workplace retirement plans like 401(k)s, 529 College Savings Accounts, or Health Savings Accounts.
On the other hand, taxable accounts don’t offer you any tax benefits, but they do offer great accessibility and flexibility. For example, you can’t use an IRA or 401(k) to invest in specific individual stocks or innovative investments like cryptocurrency, but you can with a taxable brokerage account. Just remember that you’ll owe capital gains taxes when you eventually sell those investments.
5. Get your debt under control
Paying off debt should be a fairly high priority at this stage of your investment journey— especially high-interest debt like credit card balances. That’s because the interest you’ll accrue on that debt will add up over the years, often to the point where you’ll pay off many times more than your initial debt.
There are many strategies people use to pay down their debt, but most experts agree that the most logical way to do it is to tackle the highest-interest debt first — pay that down completely, move on to the second-highest, pay that down, and continue until you’re debt free.
Just be sure to strike a balance between paying down debt and investing your money. While paying down debt can help your credit score, and your financial and psychological well-being, money invested in your 30s has a lot of years to gain value, so you should take advantage.
6. Write a budget — and stick to it
No matter how much you’re making, you’ll spend a lot less if you make a budget and hold yourself to it. There are a number of financial apps that will track your spending, and show you where you’re losing the most money; some of them will even compare your spending to your peers, and show you where you’re spending more or less, relative to them.
Once you write a budget that you can stick to, you can start saving and investing a concrete amount of money every month, which will make reaching your investment goals easier.
7. Take advantage of your employer’s matching contributions
Many workplaces will match any money you put into your workplace retirement plan. Financial experts consider this to be “free money,” so you should definitely take advantage.
Every workplace retirement plan is unique; most will require you to contribute a certain percentage of your pay before receiving the same amount in a matching employer contribution. Some employers will match all of the first few percent, and then half or less on subsequent percentages. Whatever the specifics of your plan, try to do whatever it takes to get the maximum employer contribution.
Keep in mind that it may take a few years for your contributions to fully vest, so if you lose your job after one or two years, you may not reap the full benefits of those employer contributions.
8. Put money in an IRA
As we touched on earlier, an IRA is a great investment vehicle that also offers tax advantages.
You can also put money into a Roth IRA, which won’t give you any tax advantages on the front end, but will allow you to make tax-free withdrawals before or after you’ve retired.
IRAs also give you a little more flexibility than something like a 401(k) regarding where you can put your money.
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9. Start saving for retirement
Financial experts suggest putting away 10% to 15% of your income for retirement during your 30s, so that money has a few decades to accumulate interest.
You should also consider putting away the maximum allowable contributions into a 401(k). For the 2021 tax year, that number was $19,500.
With a runway of three decades or more before you retire, the investments you make now have the potential to be the most important ones of your life.
10. Lean heavily on long-term stocks
Over the long run, stocks have averaged around a 10% return, which is fantastic. The only drawback is that the stock market is not predictable. Its behavior is volatile, meaning you’ll have to weather a few crashes if you’re in for the long run.
But that’s one of the advantages of investing early; you’re insulated from volatility by your timeline. If you have an appetite for risk, this is a great time to pick a few stocks and ride them into retirement.
If you don’t have an appetite for risk, you can still profit off the long-term market by putting money in ETFs or mutual funds.
11. Think about buying a home
Many people in their 20s are renters, which is understandable — renting gives you flexibility and mobility, and it can be less expensive, in the short term, than buying.
But as you ease into your 30s, you should consider buying a home as a way to build wealth. Historically, real estate has been a great investment, and mortgage rates are at historic lows right now. The sooner you buy, the sooner you can start building equity and upping your net worth.
Just be sure you know what you’re getting into. Owning a home comes with a lot of responsibilities, both financial and practical.
12. Hold some cash in reserve
As a general rule, you should be investing as much as you can in your 30s. But for practical reasons, you should keep a healthy amount of cash on hand to cover your expenses, plus any emergencies that come up.
Financial experts suggest keeping around 50% of an average month’s expenses in a checking account so you can handle any expenses. You should also have an emergency fund of three to six months of expenses, in case you lose your job or experience any other sudden change in circumstances. If you keep this emergency fund in an online savings account, you can earn a higher rate of interest than if you keep it in a conventional bank savings account.
Don’t hold too much cash, though, as its value erodes with inflation. And you could be tempted to spend impulsively, especially if your investments experience a sudden downturn.
13. Plan for the future — and the unknown
Now that you’re investing in earnest, you should make a few other responsible financial decisions.
First, make sure you have life insurance, especially if you have dependents. Consider term life insurance, which is a less expensive form of life insurance than permanent life insurance. (Term life insurance covers a set “term” of years, instead of being an ongoing policy.)
Also consider buying disability insurance, as people in their 30s have a much higher chance of becoming disabled than they do of dying.
Finally, consider putting together an estate plan. A good estate plan will simply specify how your assets will be handled and distributed in the event of your death. Crucially, it also lets you name a guardian for your children. While it can be an unpleasant and even frightening prospect to confront, planning for your own death can also be a great source of comfort once it’s done.
14. Don’t be afraid to ask for help
If you want to get a haircut, to renovate your kitchen, or get your car checked out, you’ll turn to a professional. It should be no different when it comes to your financial situation. Financial planners can lay out a comprehensive savings and investment plan for you, and working with a planner has been proven to improve your return on investment.
Professional advice is especially important if you’re just starting your investment journey. Instead of learning by experience, you can benefit from an expert’s knowledge and make sure you’re starting out on the right foot. After all, making the right investment decisions in your 30s can benefit you for decades, while making the wrong ones can hold you back for years down the line.
15. Get on the same page with your partner
If you’re getting married or entering into a long-term relationship, it’s very important that you and your partner have similar financial priorities. After all, if you’re saving and investing as much as possible, while they’re spending every dollar they make and racking up credit card debt, you may not have compatible visions of the future.
The solution to this is very simple: communication. Make sure you talk about your specific financial goals with your partner and the concrete steps you’re taking to achieve those goals. Let them know what kind of lifestyle expectations you’ll have, and listen to their goals and desires. With a little work and compromise, you can likely meet in the middle.
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16. Start saving for your kids
When you’re revving up your investment strategy, it’s easy to get tunnel vision and forget you’re not just putting money away for yourself — you’re also providing for your future family.
The main expense for your future children is going to be college tuition. The cost of college has been on the rise for decades and is showing no signs of slowing down. While it’s definitely possible that your future children could receive financial aid, it’s not guaranteed. So it’s wise to save as if you’re going to pay the full price of tuition.
A 529 plan is a great way to put money away, before taxes, for future educational expenses, though it comes with caps on annual contributions. You could also use a conventional savings account, as you don’t want to put this money at risk.
17. Ask for raises
As you enter your 30s, you’re approaching your prime earning years. The more you earn, the more you can invest, so do everything you can to max out your earning potential. Don’t be shy about asking for raises at work, or changing jobs if you can negotiate a higher salary. Just as your 30s are your prime earning years, this is also the best time to invest, as your money has decades to grow!
18. Live below your means
While you’re maximizing your earnings, you should be minimizing your expenses. We touched on a few ways to do this earlier — like paying down your debt and drawing up a budget — but you should be taking a big picture approach that brings your expenses down to the bare minimum. Remember, the less money you spend, the more money you can invest!