We all tend to focus on different priorities during different life stages. What’s important to us in our teens is typically not what we value most in our twenties, thirties, and so on.
By age 40, most Americans are somewhat settled in life, with a family and a mortgage, as well as some sort of retirement plan. Yet in many cases, people in their thirties overlook some important financial tasks.
Here are seven money moves to focus on during your thirties so you can get to age 40 with minimal stress.
1. Revisit your student loans
If you haven’t finished paying off student loans, revisit the interest rate you are being charged. Also assess if it is smart to pay those off faster — especially if you aren’t able to deduct any of the interest on your tax return.
In certain situations, you can have your federal student loans forgiven, canceled or discharged. That means you won’t have to pay back some or all of your loan(s). Public Service Loan Forgiveness is the most common way people apply to have their student loans forgiven.
If you are able to get some or all of your loans forgiven, work with your advisor to put the money you would have paid on those loans toward other priorities.
2. Pay off high-interest debt
If you have credit card debt, discuss the outstanding amounts and interest rates with your financial advisor. Depending on the interest rate you’re paying, you might want to divert a sizable portion of cash flow to paying off those cards before funding other plans.
Every dollar you pay to a credit card company in interest is a dollar you cannot save or invest for another goal. Try to be debt-free before your 40th birthday.
3. Optimize your retirement savings
Retirement may still seem far off in your thirties, but the earlier you begin saving, the more you will benefit in the long run. If your employer offers a retirement plan such as a 401(k) or 403(b), consider contributing the maximum amount allowed each pay period. The IRS raised the maximum contribution limit by $500 for 2024.
The money you defer will not be taxed in the year you make the contribution; instead, it will be taxed when you withdraw the funds. If you are investing in the plan each month, and your employer offers a match, consider increasing your contribution so you are investing enough to take full advantage of their matching program.
4. Make sure your advisor knows your current priorities
If you have a goal other than retirement, be sure to speak with your advisor about investing for the time frame associated with that goal because putting all your savings into a retirement vehicle might not be to your advantage.
For example, if you’re thinking about purchasing a home, there are numerous factors to consider. After getting pre-approved for a mortgage loan, you’ll know what price range and payment you will be looking at. Build into your budget all the expenses you’ll incur in addition to the mortgage, including homeowner’s insurance, property taxes, repairs, maintenance and new furnishings.
Also review your emergency fund at this time; you might want to increase it once you have purchased your home. You could encounter some unanticipated expenses you didn’t experience as a renter (fixing a furnace, for example).
You’ll also want to consider saving some money outside your retirement plans for a down payment. The rates/points can vary drastically depending on how much money you put down, so be sure to discuss all options with your mortgage broker and financial advisor.
Additional financial goals might include purchasing a car or planning for a big vacation. If so, work with your advisor to include these major purchases in your budget.
5. Review your insurance coverage
If you have not reviewed your insurance coverage with your advisor since starting a family, please make this a priority. If something were to happen to you, you want to make sure you are transferring that risk of the loss of your future income to an insurance company, to protect your family’s financial future. Life insurance can enable your family to maintain their current lifestyle and can get your spouse to retirement more easily. Make sure your coverage is sufficient to secure the financial future for your children.
Also discuss with your advisor if disability insurance is something you need, either now or later. If you pay the premium for a long-term disability policy, the benefits would flow to you tax-free. However, If your employer is paying the premium, the benefits would be taxable to you, so your true cash flow may be lower than what you had initially anticipated.
6. Get important documents in place
Estate planning is another important topic to review in your thirties. Make sure you have a current will, power of attorney, trust and other important documents. Also make sure they include the correct executor of your estate or trustee and that they detail your wishes clearly. Also make sure you have listed the same beneficiary(ies) on all your documents.
7. Boost your credit score
You never know when you might need to take out a loan or refinance your mortgage. The higher your credit score, the easier it will be to borrow at an affordable rate. If your credit score could use some work, you can boost it by paying all your bills on time, eliminating some of your credit card debt and keeping longstanding credit accounts open.
Also, in some cases, a higher credit score can get you discounts on auto and homeowner’s insurance policies.
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Check these important items off your to-do list before you turn 40, and you’ll have even more reasons to celebrate this milestone birthday.
We are here to guide you through the many different life events you will navigate in your thirties. Please reach out to us with any questions so we can continue to help you plan for your future.
Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. No investment strategy can guarantee your objectives will be met. Past performance is no guarantee of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
