Investing In Your 30s Is Not Impossible!
Some like to say that your 20s is the best time of your life. While that can be true for your social life, your 30s are really where it’s at financially.
By now, you’ve hopefully established a successful career and are bringing home a fat paycheck every 2 weeks. You finally have the financial means to truly enjoy all life has to offer.
But just because you now command a high salary doesn’t mean you should neglect your investing.
For one, you may be thinking of starting a family. Kids are very expensive; you need to make sure you’re as financially stable as possible before having them. Also, you’ll probably want to leave them an inheritance of some sort when you pass.
There’s also retirement.
Many people start investing early on, but don’t take it very seriously; they know retirement is important, but they think it’s too far away to worry about.
The truth is, even a modest retirement is expensive. You have to save enough money to potentially survive (let alone enjoy) life for many more years.
Thus, it’s all the more important to really ramp up your investing efforts in your 30s.
Whether you’ve been diligently investing since you earned your first burger-flipping paycheck or you’ve never even heard of an IRA, here are some tips that can help you catch up and start building a strong, secure financial future.
1.) If You Haven’t Started, START NOW!
If you could only take one piece of advice from this article, we’d like you to take this one.
See, the earlier you start investing, the more returns you can earn over your lifetime.
We’ve illustrated the power of compounding in other articles, but let’s look at an example for your convenience:
Let’s assume you plan on retiring at 65. You spend ages 22-32 putting $2,000 per year into an investment account with a 4% return. Once you hit 32 and make your last contribution, you stop contributing until retirement.
At the end of those 10 years, your balance is $24,972
Now, let’s say you wait until you’re 32 to start investing. Same amount of time, same contribution per year, same annual return.
But watch this.
Due to the power of compounding, your account balance in the first scenario will be $91,109.93 once you retire.
As for the second scenario, your account balance will be a meager $61,550.60 upon retirement.
Just look at that: an extra $30,000 at no extra time or money cost, simply because you invested earlier.
For no extra work, you just earned an extra entry-level year’s salary. Not a bad deal!
The best time to start investing was yesterday; seeing as you can’t exactly travel backwards in time, the best time to start investing is now.
2.) Get A Financial Advisor
Financial advisors are professionals dedicated to helping you meet your financial goals by any legal and reasonable means necessary.
Even if you think you have your finances figured out for the rest of your life, chances are the financial advisor can do it better.
First of all, they get paid to help you. The better you do, the better they do; it’s a mutually beneficial relationship.
Second of all, they can do more of the work in less time since they have tons of experience and many more resources available. What’ll take you hours could take them 20 minutes.
Third of all, they have all hours of their work day to help you plan for the future, whereas you might not have the energy to do so once you come home from the office.
Even if you’re a financial advisor yourself, it never hurts to hire an industry peer to do that stuff for you.
Hey, even accountants hire accountants to do their taxes sometimes.
3.) Autopilot Your Investing
With a new decade of life comes new responsibilities; new responsibilities require more money.
Once you reach your 30s, you most likely have a family, a house, a nice car, or some combination of the 3 (among other financial responsibilities).
Despite the bigger paycheck, you can still feel the financial pressure due to these new responsibilities.
It can be tough on the psyche to set aside some of that leftover money that “should” be yours to have fun with and invest it instead.
An automatic investment plan could be what you need to stop worrying about your “fun” money being locked away in an investment account; you’ll no longer have to think about manually transferring money from your bank to your investment account each time you get paid. A lot of micro investing apps will actually allow you to fully automate your investing.
Saves you a bit of time, too.
4.) Play The Long Game
You may be closer to retiring now than you were as a wide-eyed 23 year-old, but that doesn’t mean you need to try and make big plays in the stock market!
Instead of trying to make short-term gains, your focus should be building your wealth.
That means unless it’s a hobby or your business, don’t try to beat the market by buying and selling assets. Instead, the only time you should be touching your investments is to add to them.
Of course, you should try to invest a bit more to catch up to your early-investing peers; after all, you’re most likely making way more than you did in your 20s and can therefore afford to invest more money each paycheck.
Just invest consistently and ignore the noise.
5.) Don’t Be Afraid To Get A Bit Aggressive
Again, you’re still decades from retirement; don’t think that everything outside of bonds is too risky for you.
The younger you are, the less you have to lose.
The younger you are, the more time you have to recoup those losses (especially if you’re crushing it financially in your 30s).
The younger you are, the more your returns will average out over time (an investing rule of thumb).
No matter what, your financial advisor would be a great person to talk about investment options that match your risk tolerance.
6.) Max Out Your 401(k) (Or Other Plan) Employer Match
Personal finance experts continually debate the merits of maxing out your 401(k) contributions.
What most don’t debate is the value of free, company-sanctioned, tax-deferred money.
If you’re enrolled in your employer’s 401(k) or 403(b) plan and they match a portion of your contributions, at least contribute that amount that they’ll match to.
We can’t reiterate this enough: it’s free money.
Plus, Uncle Sam doesn’t get his share until you retire.
Oh, we should also mention: don’t touch your 401(k)403(b) until you retire, even if you have some grand project you want to undertake but lack the funds to do so.
Again, play the long game.
7.) Consider Other Retirement Accounts
By maxing out your 401(k)/403(b), you get as many as pretax dollars as your paycheck and 401(k)/403(b) plan allow.
But what do you do once you can’t contribute any more money to your employer-sponsored plan?
It’s time to talk to your advisor about other retirement accounts, such as
- Traditional IRAs – Contributions are pretax; withdrawals during retirement are taxed
- Roth IRAs – Contributions are NOT pretax; withdrawals
- Roth 401(k)s – Combine aspects of 401(k)s and Roth IRAs
If you run a side hustle, there are some other retirement plans you could take advantage of:
- SEP IRA – IRA for small business owners and the self-employed
- Solo 401(k) – 401(k) plan for business owners with no employees and the self-employed
Better Now Than Never
It’s never too late to start investing to build wealth for the future.
Unless you’re in your late 50s and never heard of a retirement account. Then you might actually be out of luck.
Of course, you ideally would have started investing back in high school or college (or have your parents do it for you).
Most people are broke at that point in their lives, though, so it’s understandable if you didn’t.
Despite the compounding opportunities you miss out on by waiting to seriously invest until your 30s, there are some distinct advantages to creating your financial future in your 4th decade.
For one, you’re likely to be more secure financially. Even if you have a family and kids to take care of, you and your spouse are both bringing home a lot of bacon.
In addition, your 30s self is likely to be a bit more mature than your 20s self; this makes it easier to invest as you’re less likely to succumb to temptation.
Not to mention you’ve experienced a lot of those “money-wasting” 20-something activities and may have grown bored of them. A prime opportunity to redirect some of that fun money into building your financial future.
Just follow these tips, exercise some self-discipline, and watch your wealth grow!