Money Moves In Your 30s

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What To Do In Your 30s!

Each decade of life comes with its own unique set of requirements and challenges. So when you hit your 30s and start settling into a new phase, what financial responsibilities come with that transition?

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Advance your career.

In your twenties, you developed a marketable skill. Now it’s time to apply that skill to increase your earnings.

Research potential career paths for workers with your skill. Identify the types of jobs and companies where you might fit. Consider whether you should go back to school for an advanced degree (or if some free online courses can help boost your career). You might even consider moving to a city where you can find more opportunities in your field.

Sharp career turns can be worthwhile but also risky. You’ll need a financial plan to keep your budget steady while you’re changing course.

Rethink your budget.

You established a budget in your twenties and perhaps accumulated some savings. But your income and expenses, as well as your needs, wants and dreams, will likely change from year to year. Your budget will need to adjust to life changes such as getting married, having kids or starting your own business. “It’s a balancing act,” says John Deyeso, a financial planner in New York City, who works with many young adults (and is himself 37 years old). “Once you get into your thirties, you have more money and more goals, so how do you spread that around?”

You may need to cut spending in some areas to reallocate elsewhere. For example, when I got pregnant with my first child, I slashed spending on the “going out” line item—and added costs to my budget on a new “baby supplies” line item. (Happy hours were off the table anyway.)

Monitor and improve your credit.

You should check your credit report every year. You can do this free by visiting AnnualCreditReport.com (not the site with all those catchy commercials, mind you, which can wind up costing you money) and viewing a free report from each of the three credit bureaus every year. Regular reviews of your report could help you fix errors quickly, catch an identity thief at work or get on top of a potentially delinquent account. To dispute an error in your report, contact the credit bureau directly. If you notice a problem in one report, check reports from the other two bureaus as well.

Note that your free credit report does not get you a peek at your actual credit score. You’ll usually have to pay a fee to see your FICO score. At myfico.com, you can get your credit report and FICO score from each of the three credit bureaus for about $20 a pop. (Your score can vary from bureau to bureau.)
– via www.kiplinger.com

Should Your Retirement Planning Change?

Should your retirement preparations change with each decade of your working life? Absolutely! For each person’s unique situation, the decisions will be different, but it’s important to take a look at a few general rules and see where your life, career, and financial situation fit in.

Condition Yourself to Save

“No one else is going to save for you,” said Michael Hardy, a certified financial planner with Mollot & Hardy in Amherst, N.Y. Fewer than one in five employees working in the private sector is covered by pension plans, according to the Bureau of Labor Statistics. And Social Security trust fund reserves are expected to be depleted by 2034, according to the latest Social Security trustees report. If Congress doesn’t take any action, the tax revenue that funds the program will only be able to pay 75 percent of recipients’ benefits. Consequently, you must establish the discipline to set aside money for the future, Hardy said.

The easiest way to do this is by automating savings. Participate in your workplace retirement savings plan and have your contributions automatically deducted from your paycheck. If you’re self-employed or your employer doesn’t offer a retirement plan, set up your own — such as a simplified employee pension (SEP) plan or 401(k) — through an investment firm with low fees, such as Fidelity or Charles Schwab.

Even if you can’t set aside much, the key is to start saving sooner rather than later to give your retirement account time to grow. “Small amounts of money over a long period of time with a good rate of return will equal a lot of money,” Hardy said.

Set Aside Enough Money

Ideally, you should be saving at least 10 percent of your income per year for retirement, Hardy said. By setting aside this much starting in your 30s, you should have enough saved by the time you reach retirement age in your 60s to have a comfortable standard of living, he said.

If there’s not room in your budget to set aside 10 percent of your paycheck, start lower. But make sure you increase the amount you contribute each year as your income rises, Hardy said.

Choose Wisely

To make the most of the time you have to accumulate retirement savings, you need the right mix of investments for a solid rate of return. The average investor in equity funds earned about 3.8 percent annually over the past 30 years while the Standard & Poor’s 500 index earned 11 percent annually during that period, according to Dalbar’s annual report of investor returns.

Vincent Wagner, a certified financial planner and president of Guide Tower Financial Planning in New York, recommended buying exchange-traded funds, which track an index such as the S&P 500. He said ETFs are a better option than mutual funds because a majority of funds don’t perform as well as the market. Plus, mutual fund fees are higher than ETF fees, which means less money in your account at retirement. For example, if you have a 401(k) balance of $30,000 and save $5,000 per year for 30 years with a 6 percent annual rate of return, you’ll have $89,500 less if you pay 2 percent in fees per year versus 1 percent, Wagner said.

If your workplace retirement plan doesn’t offer ETFs as an investment option, talk to your plan administrator about adding them to the mix. Otherwise, another option to consider is a target-date fund, which automatically adjusts allocation of equities and fixed-income assets to a more conservative mix as you approach retirement.

Learn to Ask for a Raise

Less than half of those surveyed by online salary database Payscale.com said they have ever asked for a raise in their current field. If you’re not negotiating your salary, you’re not only short-changing your income but also your retirement savings.

Wagner offered this example: Say you’re age 35 and earn $50,000 a year. If you settle for a 3 percent annual cost-of-living increase rather than negotiating a 5 percent annual raise, you’ll have lost nearly $950,000 in potential earnings by age 65.

He recommended using sites such as Payscale.com and Glassdoor.com to research your value and learn the art of negotiating your pay. Then you can funnel any raises or bonuses you get into your retirement account.
– via GOBankingRates

Are you planning for retirement already? What financial changes have you made in your 30s?

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