Let's talk about how to build wealth in your 30s! So you’ve spent your 20s establishing your career, becoming financially independent from parents, and are slowly paying down student loan debt. While your focus may be far from thinking about retirement, your 30s are a great time to build wealth.
Building wealth can start as soon as you get that very first paycheck while in high school. However, most of us don’t start thinking about building wealth until we are established in our careers and we are offered a workplace-sponsored retirement account like a 401k.
Now that you’re in your 30s, it’s time to level up your finances. You’ve left your 20s behind, here are a few steps to take as you build wealth in yours 30s.
Define wealth for yourself as you plan out how to build wealth in your 30s
Defining wealth is the first step to build wealth in your 30s. Henry David Thoreau is quoted as defining it like this “Wealth is the ability to fully experience life.” For many of us, the term “wealth” might seem like a foreign concept. The words wealth and rich are often used interchangeably but they are not the same.
In the book, The Millionaire Next Door, Thomas Stanley, and William Danko found that most wealthy people and self-made millionaires live in average neighborhoods, drive used cars, and are very careful with their money. Social media, television, and movies have tried to shape the definition of wealth for us but only you can decide what it means to you. Although money isn’t the most important thing, it touches every corner of our lives.
Before you learn how to build wealth in your 30s define it. What would a wealthy life look like? How would it affect your relationships, your mental, emotional and physical health?
Create a plan for your goals
During this decade of your life there are so many things you might be thinking about, including homeownership, getting married, and possibly starting a family. Start by making a list of the things you wish to purchase or experience that require money.
Jotting down and memorializing all of your financial goals will help you prioritize and serve as a reminder of what’s important to you. Understand that this list of goals is guaranteed to change and grow. Once you have a list of financial goals it’s time to create a plan.
Create a spending plan
Once you have a list, you can start working towards your goals. Having a budget will help you understand your income and your expenses. The key thing here is to spend less than you earn so that you have money to dedicate to your goals. Spend less than you make and invest the difference.
As you plan out how to build wealth in your 30s, you must assign every dollar you earn a job. Some of your earnings will go to your essential expenses (needs) and discretionary expenses (wants). But don’t forget to pay yourself like a bill and begin to save for the things and experiences on your goals list. By having a plan for your money, you can ensure when and how your money is spent.
Reduce, eliminate, or refinance debt
As you enter your 30s, be aware of and understand your debt. Eliminating any high-interest debt, particularly credit card debt, is a must. Not all debt can be paid off in a matter of months. The average student loan debt in America is $32,731. Focusing on reducing the cost of the debt by refinancing a student or vehicle loan might be an option for you.
As you eliminate debt, you’ll be able to redirect those dollars to your savings goals. Money that was once earmarked to pay debt, can now go to your savings goals.
Get serious about retirement and estate planning
Employers do a poor job explaining all of the benefits that might come with employment. One thing to note is that contributing to a workplace retirement account like a 403b or 401k is one of the easiest ways to build wealth. If your employer does not offer a 401k, consider opening an Individual Retirement Account (IRA).
During this decade, you are closer to retirement age than you were in your 20s. Think about what age you’d like to retire. The most powerful thing about retirement accounts is that they are more than just saving for retirement. In fact, we should replace the phrase “saving for retirement” with “investing for retirement.”
Investing for retirement is the best way to build wealth in your 30s. Truly, it’s the best way to build wealth at any age! Become familiar with the retirement accounts available to you and make contributing to them a priority.
Your 30s are also a great time to start thinking about estate planning. Especially as you have life transitions and take on new responsibilities. For instance, marriage, parenthood, buying your first home tor taking care of elderly parents.
Create the right money habits
Many of our money beliefs are learned either directly or indirectly from our parents. As we begin to earn, spend, and save (or not save) money we begin to create habits that can be detrimental to our financial goals. Below are a few key things to be aware of as you plan out how to build wealth in your 30s.
Be an intentional (mindful) spender
It’s important to understand what your spending triggers are and address it. Many of us shop out of boredom, when stressed or on an impulse. Ask yourself:
- Is this a need or a want?
- Can I afford to pay it in full right now?
- When am I not getting on my priority list by making this purchase?
- How many hours of work will this time cost me?
Being an intentional spender is about being aware each time we spend money. It’s not about deprivation. Instead, it’s about remembering your goals.
Pay yourself first
An easy way to guarantee you save for your financial goals is to pay yourself first. Your retirement contribution is deducted from your pay before you have a chance to spend it. One way to save for your short-term goals is to automate it. Before you pay your rent, mortgage, cell phone company, or any other bill, set money aside for your goals. You can have contributions to your savings account automatically deducted from your paycheck.
Align your values with your spending
As you become more mindful about where you're spending your money, take time to consider whether your spending aligns with what you value most. Take a look at your bank statements for the last several weeks and decide whether there’s a misalignment. Your spending in your 20s may have fit you then but it’s a new decade. As you learn how your build wealth in your 30s, you might value different things now.
Avoid lifestyle inflation
Now that you are making more money than ever before, you might be tired of living the broke lifestyle. You’ve worked hard and it’s time you live comfortably. But don’t confuse comfort with luxury.
Lifestyle inflation is the act of spending more as we make more. The problem is that if we are not careful, it’s easy to spend more than we make. Don’t be afraid to spend where it counts but understand that for every unplanned purchase, you are deciding that the purchase is more important than your financial goal.
Develop a millionaire mindset
In order to build wealth in your 30s, believing you are worthy and capable of being wealthy is an important component. But developing a millionaire mindset doesn’t just come with wishful thinking.
Understanding the power of compound interest and the basics of investing is going to empower you as you build wealth in your 30s. Don’t be afraid to take risks. Although there are risks with any type of investment, debunking some of the common investing myths by understanding the investing basics will help you develop the confidence to take calculated risks.
According to this INC article, 65% of self-made millionaires had three streams of income, 45% had four streams of income, and 29% had five or more streams of income. Just like your investments, diversify your income streams. A millionaire mindset will allow you to stay committed and focused on your goals.
Three things to remember about how to build wealth in your 30s
In closing, remember this about how to build wealth in your 30s; spend less than you earn, and invest the difference. The more you earn the more you are able to invest. Build, increase, and diversify your sources of income. As your income increases, avoid increasing expenses and instead increase your investment contributions. Be mindful about where and how you spend money by tracking your expenses.
Eliminate the things that you don’t value. Building wealth at any age is possible. The earlier you start the longer you allow your money to grow through investments.
Getting close to 40? Check out our article on how to build wealth in your 40s.