A Financial Checklist for Your 30’sSubmitted by Castlebar Asset Management on March 10th, 2016
As you enter your 30s you start running out of excuses on why your financial house is not in order. As you get older time is at a premium to spend on mapping out your goals and achieving them. I often hear people say they don’t know where to start! Here is a check list to get you headed in the right direction.
Budget: The first stop on your check list will be to look at your spending. Budgeting is not fun, I hear that all the time from clients. Having money can be fun. The only way to make sure you have enough money to spend on the things you really want is to track and monitor your spending.
Make The Most Of Your 401k: Your 401k or workplace retirement plan is one of your largest assets. You are adding to it each paycheck and it will do a lot of the heavy lifting to meet your retirement goals. It is important to make sure you are getting the maximum benefit from your 401k. You should be at a stage in life to be contributing more than just enough to receive the matching contribution from your company. Challenge yourself to increase your contribution by one percent of your income every six months! If you have questions about how to make the most of your 401k our 401k Review Service is a great fit for you.
Rainy Day Fund: Is your family prepared for an unexpected financial event? We recommend to our clients they have 3 to 6 months of expenses in savings. If you have not built a budget yet, then you can use income as a replacement number. Building up your rainy day fund takes time but it is the foundation of a solid financial life.
Create a Financial Plan: Many people I speak with in their 30s think that financial plans are only for those with large investment accounts or will cost a fortune. Both statements are flat out wrong. You can get a financial plan created for a reasonable cost that will be comprehensive and offer strategies to reach your financial goals.
Multitask Your Goals: Multitasking at work leads to bad outcomes (at least in my world) but having concurrent financial goals is a fact of life. You will have to rely on your financial plan to guide you on how to save for retirement, save for your children’s education, pay off debt and keep your emergency fund in good shape.
Get Out of Debt: The benefits of being debt free are clear. If you are not using your income to pay off debt you’ll have more money to focus on other areas of your life. You’ll need a plan to pay off your credit cards, student loans, auto loans and then your mortgage. Our clients who are debt free (except for a mortgage) are generally clients with the lowest financial stress levels.
Diversify: The concept of spreading your investments into different areas should not be a foreign idea. Having a diversified portfolio of stocks, bonds and international investments that match up with your risk tolerance is important to reach your goals.
College for Your Children: Saving for college is something that we spend a lot of time discussing with our clients, even though their own retirement is a higher priority item. Saving for college is an important item for all parents. Discussing with your spouse how much of college you would like to pay for and mapping out a plan is important. The sooner you start the better.
Non College Goals for Kids: First cars, weddings and private high school are things parents want for their children but can fall through the financial planning cracks. Once you have a clear path on how you’ll tackle college you can start to zero in on achieving some other financial goals for your children.
Life Insurance: Nobody likes thinking about life insurance (unless you sell life insurance) yet its something you can’t really ignore once you hit your 30s. Term life insurance is a cost effective way to protect your family in the event you or your spouse unexpectedly pass away. If you or your spouse stays at home you should still buy a life insurance policy on them. The spouse who is at home may not bring in any income but their loss would likely throw your world upside down. Having a life insurance policy will give you flexibility at a chaotic moment.
Estate Planning: The perception that estate planning is only for the wealthy is untrue. Everyone needs to have some of the core estate planning documents in place. Getting a will, power of attorney, medical directives and HIPAA authorizations are important to have no matter your net worth. If you are a parent this topic takes on even more importance. Who looks after your children if you and your spouse pass away? This is something you want to have full say in and creating an estate plan is the only way to guarantee your wishes are carried out.
Communicate with Your Spouse About Money: Couples who talk about their finances have better relationships. There are loads of research studies that show this fact. Be open with each other about your financial situation, agree (or compromise) on what goals you want to achieve and be on the same page about how you are planning to achieve your financial goals. Set an appointment with each other to meet monthly or quarterly to review your finances. Avoid having an “Out Spouse” in your financial relationship.
Where Does Your Next Dollar Go: When you get a raise, earn a bonus or have some other type of windfall you should know where this additional income should go. In some cases you’ll be able to treat yourself, but it may be better to pay off debt, bump your 401k contribution or make an extra payment to the kid’s 529 plan.
Splurge On Yourself: Build some wiggle room into your financial life for life’s little luxuries. It may be a new outfit for yoga class, taking your spouse out for an unexpected date night or a fun trip for your family. Often we can focus on short term things that we forget to reward ourselves along the way.
10 Financial Commandments For Your 30s
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.