Naturally, instability and carefreeness characterize your 20s. However, as you grow older, you’re faced with more serious concerns – like the best ways to build wealth in your 30s.
Now here’s the hard truth!
Building wealth is difficult. It does not depend on how much you earn or how stable your job is. Even having your life figured out does not guarantee wealth or financial stability.
Having bad money habits is the parasite. It can ruin your monetary plans and fast-pace your walk to financial decline.
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As a result, it is only wise to adopt working strategies to guarantee financial freedom and build wealth in the long term.
In this article, we will address the various tips and habits you could inculcate to achieve this goal and set yourself up for wealth.
Best Ways to build wealth in your 30s
Spend below your means
It’s a normal phenomenon to earn more as you grow older and start advancing in your career. Because of this, most people spend more as they earn more. You subconsciously adjust your lifestyle and preferences to fit your current earning power.
This is sometimes referred to as lifestyle inflation, or lifestyle creep.
The downside of this is that over time, you confuse comfort with luxury. You suddenly long to own a nicer car, more expensive clothes, or to even eat at fancier restaurants. Soon, it gets out of hand, and you realize that you’re spending more than your average income.
Over time, your finances take a hit. But by the time this happens, it would be too late.
Hence, avoiding lifestyle inflation is the key to minimizing your spending. Here are some ways you could do this:
- Increase your spending gradually: It’s wise to make progressive changes to your lifestyle and spending habits when you earn and spend more. Instead of trying to do everything at once, take it step-by-step.
For instance, instead of renovating your whole house at once, you could start by fixing leaking pipes and drainages, or rewiring the electrical system.
- Stop trying to keep up with society or to prove a point: Although this is prevalent among young people in their 20s, people in their 30s are not left out.
Letting other people’s spending habits influence yours is detrimental. You end up spending to impress them, and unintentionally spending more than you are supposed to.
- Plan your finances: This involves having a spending plan to track your income and your expenses. It involves prioritizing your needs over your wants and spending on a budget.
Diversify your income
One other way of building wealth in your 30s is to have multiple sources of income. While you might not be able to control how much you earn from your full-time job, you can augment that amount by having other income streams – active and passive income.
Active income streams are like side gigs or part-time jobs. However, they require a bit of extra work on the side, and the more money you get from active income, the easier it is to achieve your financial goals.
On the contrary, passive income doesn’t require that much work. You just have to put in the initial money and effort, then sit back and let your money work for you.
This is undoubtedly the best way to build wealth. However, it is also the most crucial as it could equally lead to a disaster if you do not know how to make your money work for you.
Eliminate existing debts
Building wealth in your 30s can be difficult if you have a pile of existent debt. One way to ensure you take out these loans is to come up with a repayment plan.
Whether it’s student loans, credit card loans, mortgages, or personal loans, managing these debts and creating a plan to repay them would help in managing your finances. It would help you set priorities, keep track of your expenses/income, and identify potential savings that may help repay the debts sooner.
The sooner you eliminate these existing debts, the more money you can set aside, and the easier it is to accomplish your savings or investment plans for the future.
For personal loans, you can prioritize paying off those loans with the highest interest rates, as they would cost you the most.
And if you have more than one outstanding debt, work out how much you can afford to repay on each, based on the minimum repayment.
On the other hand, prioritizing your debts can also work if you’re able to repay more than the minimum.
Start planning your retirement
The average age for retirement is from 60 to 66 years. Hence, being in your 30s means you’re just a few decades away from your retirement.
Considering how much you’ll live on every year in retirement, and how much you’ll need to make to fund your retirement years, starting your retirement plan early will help you hit these goals, and reduce the financial pressure on you in your 40s and 50s.
You can choose to create retirement accounts that will help you build compound interest on your savings. It simply involves earning interest upon interest in your savings, and it allows you to build exponentially on whatever amount you saved.
Saving for retirement can be easy if you have your long-term goals in place. What do you want your retirement to look like? How much do you need to save? How do you plan on saving that amount of money?
Understanding how compound interest works is also an important factor. Once you do, you can consider your options and decide on the various easy you can draw your retirement income.
Your current income can affect how you save towards retirement. And so, it is pertinent to budget and save early.
However, your retirement saving plans are bound to change as your life changes. It is only natural to examine your goals and adjust them if necessary.
Consider long-term investments
One of the best ways to build wealth in your 30s is to consider long-term investments. And the best time to consider this is in your 30s. At this age, you are more prone to taking calculated investment risks because you have enough time on your side to recover if things fall through.
Also, there’s enough time before your retirement age for your investments to grow and mature. Regardless, it is wise to stay away from speculative investments—that is, investments that over-promise and under-deliver.
As a general rule, it is best to target basic investments and strategies than those considered high-risk.
One simple way to reduce your investment risk is with dollar-cost averaging- investing fixed amounts at regular intervals, regardless of what direction the market is moving in.
This strategy can help you escape the urge to monitor the market, a move best left to market professionals.
Some of the various investment options to consider in your 30s include:
- Real estate: This is one smart way to invest money towards your retirement. You can buy shares in a publicly traded real estate investment trust (REIT) to learn about the different real estate available in the market.
You can also invest in various crowdfunding opportunities. Another real estate investment plan can involve buying properties in real estate and renting them out for the right amount.
- Stocks and index funds: Investing in stocks is as risky as every other investment in the financial market. However, as long as you diversify your portfolio, you will enjoy massive returns on investment.
- Bonds: Bonds are simply loans to governments and corporations. The only downside to investing in bonds is its lower rate of return compared to other investments. Your investment strategy should include bonds, as they have the lowest risk.
Diversifying your investments is also a good idea, as it allows you to make profits from multiple sources.
Seek the help of a professional
Just like every other area of your life, seeking the help of a professional allows for more efficiency.
Outsourcing the services of a financial adviser will help every aspect of your financial life- from savings to debt and insurance. It also allows you to track your goals, and make adjustments when and where necessary.
Financial experts help you plan out the strategies used to build wealth in your 30s. They help you come up with ways to pay off any accumulated debts or mortgage loans. They also plan out your whole saving process in relation to what age you will retire.
Aside from retirement plans, financial advisers also help you sort out and keep track of your personal finances.
Being smart and intentional about your finances plays a pivotal role in financial stability. Even the best ways to build wealth in your 30s revolve around these two principles.
From properly planning and managing your spending to figuring out the right investment decisions to make, all these are good money habits that would influence your finances in the long run.
Regardless, it is advisable to consult a professional before making major financial decisions.
Are you in your 40s? Check out this article on how to build wealth in your 40s.