For some, the 30s may be a time for several key life events. Marriage, having children and buying a first home are common for people in their 30s.
For the most part, these life events involve either saving or using your savings. Your 30s may also see an increase in income, which may help you ramp up your retirement savings and general savings.
“You’re living the lifestyle you want to live, and building a family,” says Tim Kenney, certified financial planner at TK Pacific Wealth. “And you’ve found that you’ve got a little bit of extra money laying around or your check’s a little bigger than it used to be. And you’ve got places for that to go.”
Here are eight tips for saving in your 30s and taking advantage of perhaps your highest-earning years to date.
1. Build an emergency fund
If you don’t have one already, make sure you have asavings accountspecifically earmarked for an unplanned event. Events may include hospitalization, loss of a job, unexpected home repairs, sudden automobile expenses and any other unplanned expense.
You should have six months’ worth of spending in your emergency fund if you’re an individual and three months’ worth if you’re a couple, Kenney says.
2. Diversify your savings with CDs
Savings accounts andmoney market accountsare great for money that has to be liquid, or available in the short-term. ACDcan help you earn a higher APY than you can get on a savings account or money market account. CDs do usually have early withdrawal penalties, so make sure that you choose one that fits your time horizon for using the money. Evena two-year CDcan earn you more than 3.00 percent APY.
3. Save money by getting rid of debt
If you don’t have debt, that’s great. But if you do, paying this off should be a priority. Odds are, debt is going to be at a high annual percentage rate (APR). Even if it’s a “low” APR, paying interest should be avoided because it’s money that could go toward savings down the road.
4. Automate your savings
If you rely on yourself to remember to transfer money to savings or an investment account, there’s a chance it might not happen. Make sure you’re doing this by contributing to a 401() and also having some of your paycheck routed to a bank savings account via an automatic recurring transfer.
“I’ve found that it’s much easier if you automate it, it leaves your account pretty much the second it comes in, and you tend to be able to build a decent amount of wealth without it. You almost trick yourself,” Kenney says.
Odds are, when you automate you’ll learn to live within the money that stays in your checking account. And you’re less likely miss the money you don’t see.
5. Maximize your retirement savings
In the 2019 tax year, IRS maximum contributions for a 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Planwill be capped at $19,000.Now is the time to spread out your contributions so that you can maximize your employer-sponsored retirement plan savings. Make sure you’re at least contributing enough to take advantage of any employer-match.
“A good rule of thumb is saving 10 to 15 percent of your income in either your 401(k) at work or if you have IRAs, Roth IRAs, that sort of thing,” says Crystal Rau, certified financial planner at Beyond Balanced Financial Planning LLC. “And then if you aren’t hitting that gauge, then you need to focus on maybe cutting on back on the spending,getting a budget in placeif you’re having trouble with that.”
6. Get or stay aggressive with your retirement investments
In your 30s, you still have time on your side to make up for market losses. This is the time to take some calculated chances. Usually, atarget date fundcan help you diversify your portfolio based on your planned retirement year. For instance, a 35-year old may look for a 2050 target date fund, which will likely be heavily invested in stocks and mutual funds, which are generally more volatile and aggressive, and also contain bonds to diversify the portfolio. The target year is an estimate of the individual’s retirement year.
“If you can do it, if you can stomach it – be as aggressive as you can because your timeline is literally 30-40 years,” Kenney says.
7. Add an IRA to the mix
If you don’t have anIRA, consider opening one to diversify your investment portfolio and take advantage of its perks, which include reducing your taxable income. You can also potentially diversify your investments with an IRA. For instance, if your 401(k) is in a target date fund, your IRA can be in another type of investment, exchange-traded fund, mutual fund or stock.
If you have an old 401(k) from a previous employer, you may want toroll it overinto an IRA. If you’re going to open up an investment account for a 401(k) rollover, you may be able to earn a bonus for opening that account.Bankrate tracks the best brokerage account bonuses for you.
8. Potentially build wealth by purchasing a home
If you rent, instead of own a home, you’re not building equity. For most people, a home is the largest asset that they own. So purchasing a home may be able to help you earn equity, and save for the future by having an asset. Even thoughmortgage rateshave gone higher in the past few years, they are still low compared to historical rates.