For better or worse, by the time you are in your 30s you are no longer able to claim financial naivety.
If you aren’t sure what you should be doing with your money in your 30s, here are the 7 Financial Resolutions you must make in your 30s.
7 Financial Resolutions to Make in Your 30s
1. Eliminate Your Self-Limiting Beliefs
Before we set any financial resolutions, we first have to smash those unhelpful thoughts.
“I could save if I earned more,” “I’ll never be able to take that South American trip with my spouse,” and “I don’t have to worry about that credit card bill, my boss said bonuses are coming soon.”
So many of us succumb to cognitive distortions when it comes to our money. These types of self-limiting beliefs sabotage our financial well-being. Remember, your thoughts are thoughts; not facts. If your thoughts are distorted, check to see if you can re-frame them to be positive or neutral.
“I could save if I earned more,” this could become, “Even if I save $20 per week, it’s a great start.”
“I’ll never be able to take that South American trip with my spouse,” to, “If I save about $140 a month, we’ll be in good shape to take that trip in a year-and-a-half.”
“I don’t have to worry about that credit card bill; my boss said bonuses are coming soon,” shifts to, “Whether or not bonuses are coming, my credit card bill has to get paid first.”
2. Get Schooled on Credit
Know how to read your credit report and understand what your credit score is. There is so much misinformation out there about credit, so let me try to set the record straight. You need a good credit score. I don’t care if you don’t want a credit card or want to buy a vehicle; today, everyone from landladies to potential employers may run a credit report on you. Your credit report is a detailed account of any monies loaned to you and (hopefully) paid back.
Your credit score is a three-digit number that helps lenders determine whether or not you are a safe person to extend credit to. You need to aim for a score of 720 in your 30’s, 750 and higher is considered “excellent” by most lenders. The higher your score, the more likely it is that you’ll receive desirable (read: low) interest rates. Lenders will also trust you to pay back large loans, like mortgages. Your credit score comes from a combination of your payment history (30%), amounts owed (30%), length of credit history (15%) new credit (10%), and types of credit (10%). Bonus points for having and using a card that pays you in cash back or rewards ONLY if it doesn’t have an annual fee or its yearly fee comes with benefits that offset the cost.
You can check your credit report for free annually at annualcreditreport.com. Most credit card issuers and some banks often allow you to see your credit score. If not, you can use a free service like creditkarma.com or creditsesame.com.
3. Get Life Insurance
This falls into the “la la la, don’t want to think about it” category for most. My argument for talking about life insurance comes down to one word: legacy. Especially if you have children or stepchildren, you want to be sure you can provide for them until at least the age of 18, or older if you’re going to pay for their college education. If you are a DINK (dual income, no kids) like me, it’s important to make sure you take out a policy that would allow your partner to continue living the life they currently have.
Life insurance is precisely what it sounds like: you pay a monthly price (premium) for a life insurance policy that typically lasts 15-30 years. If you were to die during the period that policy was active, a lump-sum of money would go to the listed beneficiaries. How much you need depends on a lot of factors. If you have a child, consider that in 2017 it cost $233,610 to raise a child from infancy through the age of 18. That means at MINIMUM; you’d need a policy for $235k for each child you have. If you are a DINK, consider how much money would be required to pay off your house if you own, or allow your partner to continue renting in their current city. Make sure to add that to other outstanding loans, such as car loans or student loan.
The good news is that for a healthy 30-something, a life insurance policy is a relatively inexpensive way to ensure you are protecting your loved ones when you are gone. Before you search for one on your own, check with your HR department to see if they offer any policies. Large companies usually get discounted rates.
4. Invest 2x Your Salary in Your Retirement
In Erin Lowry’s new book, “Broke Millennial Takes on Investing,” she reinforces the idea that you aren’t saving for retirement, you are investing for retirement. Compound interest is your best friend. You are not “too old” for compound interest to work in your favor.
If you haven’t started investing in your retirement, start with 1% of your salary. Head to your HR department to get started or if you are self-employed open up an IRA or SEP. After 6-8 months contributing 1%, start increasing your percentage until you hit 8-15%. This is especially crucial if your employer offers a “match.” That means they add additional funds to your account once you are contributing to your retirement.
5. Pay Off All Debt (aside from mortgage)
Start paying down your debt aggressively in your 30s. The fewer liabilities you have, the more financially stable you are. Pay off more than the monthly minimum any time you are able. Even if it’s only the two times per year you get an additional paycheck, it will make a difference.
This financial resolutions isn’t just about your bank account; it’s about your physical and mental health. A 2013 study from Anxiety, Coping, and Stress found those with more significant financial strain felt they had more stress, and endorsed more symptoms of depression, anxiety, and poor health. And for those who have achieved this goal or who are close, you certainly can aim to pay off your mortgage.
6. Get a Raise
I say this all the time, and it bears repeating: you can only save so much money; to truly become financially stable, you have to earn more money. Consider the following before you set up an appointment with your supervisor:
How long have you been with the company?
Loyalty is important to companies. It’s more expensive to hire and train someone new than to offer a raise to a consistent employee. Review your length of time with the company in addition to responsibilities you’ve taken on over the years as additional factors in your ask.
What raises have you received in the past?
If you’ve been getting the standard 2.5-3% raise to account for inflation for several years, it’s high time to get in and ask for a more substantial increase. What the employer is doing is essentially paying you the same amount year after year! Consider whether or not you would have stayed at your current job if you had your starting salary. If the answer is no, get yourself a raise.
Do your homework.
Ask colleagues about their pay (seriously, I’m pro-pay transparency). Or you could look at sites like glassdoor.com for average salaries for people in your field. This can help you gauge an appropriate pay raise for your job. The often-touted 76 cents-on-the-dollar statistic comes from women leaving the workforce for a period of time, and re-entering at their former salary.
Don’t get discouraged.
If you are told no, don’t get discouraged. See if there is a possibility for a raise over the course of several years; e.g., 5% a year for three years instead of a 15% raise outright. Ask for other fringe benefits the company may be willing to give you. These benefits could be additional vacation days or the ability to work remotely. If neither is possible, start shopping for a new job. You are worth it.
7. Splurge Safely and Intentionally
Financial resolutions are not all about cutting and adding things to the financial to-do list! In your 30’s, you are more likely to have disposable income (yay!). Think about what you want your additional revenue to do for you. Maybe you are a Netflix-n-chill extraordinaire who excels in collecting luxury pajamas. Or perhaps you are like me, and you like to save up for a year or two and take a decadent vacation. Make your splurges serve you and your values.
That’s it! I’d suggest listing out the above financial resolutions in order of importance to YOU and tackling them one at a time.
Lindsay Bryan-Podvin, is the founder of Mind Money Balance (@mindmoneybalance)and the first financial therapist in Michigan. She brings financial literacy to women in an empathic, easy-to-understand way that unravels internalized barriers to feeling amazing about managing money. With a background in mental health research and psychotherapy, she thrilled to offer these unique, and much needed, services in our community. As she is aware that her services aren’t accessible to all, she also volunteers with Circles of Washtenaw County, a program with the goal of breaking the cycle of generational poverty.