The period of your life between 30 and 40 can be challenging, exciting, and fruitful (if you know how to leverage yourself). By now, you have a full decade of adulthood under your belt – while you’re still a younger adult, you’re beyond the age where people can mistake you for a child. Hopefully, at this stage, you have an idea of the direction you want to take your career or business. If you haven’t started a family yet, chances are, you’re considering it. Odds are, your parents are aging. But what about investing in your 30s?

In your 30s, you are beginning to add more activities and decisions to your plate all the time, with even more stockpiled for the future. Where does investing for retirement fall into this equation – and is it the end of the world if you didn’t start in your 20s?

The short answer is, probably not. That being said, now is a time to get very serious about beginning to build your financial future. This article will go into further detail regarding a very crucial period in your financial journey and how to get started: investing in your 30s.

Before we continue, Financial Professional wants to remind you that all materials in this article are educational in nature. This article is not meant to be interpreted as investment advice. Always consider your personal situation – and the help of a licensed financial professional – when making any investment decisions. 

If You Haven’t Started Investing in Your 30s

With all of the articles, posts, and videos out there about “the value of getting started early,” it’s natural to feel some anxiety if you have zero or minimal investable assets when you hit the “big 3-0.” That anxiety worsens the deeper you get into this decade of your life.

As mentioned earlier, it’s not the end of the world, but NOW is the time to get started investing. First, you have to know where.

Start with a Budget

The best thing you can do at this stage of your life is clean up bad financial habits. Chances are, you have some baggage that you have brought with you from your 20s. One of the most powerful exercises you can learn is how to budget. By budgeting effectively, you will not only be on top of your expenses; you will see what areas can be cleaned up in order to free up cash flow to start investing now that you’re in your 30s.

“Paying yourself first” is a powerful habit that follows naturally after your budget is on point. Find a dollar amount that you can commit to. You only have to make that hard decision once. Once it’s done, the funds will be transferred automatically, almost like auto-pay for your bills (except you’re gaining something in the process).

Tackle Your Debt

If you are drowning in high-interest debt, now is the time to start tackling those bills. Credit card debt and wealth-building do not go hand in hand. By proactively paying down your high-interest debt, you will free up precious cash flow that you can use to begin investing.

The S&P averages around 7% annually. Credit cards can carry interest rates of 20% and above. The math speaks for itself.

From a psychological level, you’re not counting on the funds that go towards your debts for other uses, so the switch from paying down debt to investing should not be very painful at all. If anything, knowing that those dollars are going towards something productive should be liberating.

Anxieties About Investing

If the reason that you haven’t gotten started is due to fear or anxiety of investing, that is understandable.

Luckily, you do not have to go to school and major in finance or work on Wall Street to be successful as an investor. A basic understanding of how the markets work, along with familiarizing yourself with different asset classes, will go a long way.

There are plenty of great reads that can give you an introduction to investing (a quick Google search will provide you with some respected titles). If you prefer to learn online, there are plenty of courses, YouTube videos, and websites (like this one) that will show you the ropes. Furthermore, if you choose to enlist the help of a licensed financial professional, they should be able to help you plan for and mitigate risks in your portfolio.

Investing in Your 30s: IRAs and 401(k)s

Luckily, retirement is still likely a couple of decades away for you, so if you haven’t started investing, it’s not the end of the world. However, if you’re not already, now is the time to get serious about accumulating assets for your eventual retirement. Your company 401(k) is likely a great place to start.

A 401(k) offers higher contribution limits than IRAs and also features an employer match. Remember, the key to building your financial future is the aggressive accumulation of assets. That employer money can really go a long way, especially if you stay with the same employer for a long time.

IRAs (Roth or Traditional) can also be a handy tool. Remember, you can max out both a 401(k) and IRA in the same tax year. An IRA will offer much more flexibility in terms of your investment options than your 401(k).

If you are investing in retirement accounts throughout this period, keep in mind the rules regarding taxes and distributions.

On the other hand, you’ve maxed out your retirement account options and/or you want more flexibility with contributions and withdrawals from your investment accounts, brokerage accounts can play an essential role for you as an investor.

On the third hand, if you are an employee and work for a company that shows signs of a promising future, it may be worth digging to see if you have the ability to start purchasing employer stock through an ESPP or ESOP.

Financial Planning and Investing in Your 30s

As mentioned earlier, your 30s are a period in life where you are hit with more and more responsibility. This leaves little time (and money) for investing. The older you get, the more you have to take on. With all of this added responsibility, financial planning may be more critical than it has ever been for you.

Consider Your Family

If you have a family at this point, you now have to think beyond yourself. Many parents feel the pressure to assist their children with their future education. If you fall into this category, you can consider looking into a State 529 plan. These are accounts that allow for tax-deferred growth while the funds remain in the account. If you use the funds for qualified higher education (or some private/secondary education up to $10,000), the funds come out completely tax-free.

What Do You Want?

Beyond the responsibility you may feel for taking care of your children’s future, now is a great time to start figuring out what you want to accomplish financially. While retirement is the main subject of goals conversations in investing, that doesn’t have to be the only goal that you plan for.

Perhaps you have ambitions of starting a business down the road.

Or maybe you have a large purchase in mind: a vacation home, vehicle, etc.

Plan Ahead

With anything in life, the more you give something deliberate thought and planning, the more likely it is that you will accomplish it. While you may still be young by most measures, the clock is ticking. The best thing you can do is pin down what you want to accomplish financially and take consistent action towards it through your investing and financial decisions.

If you are married or in a serious relationship, this is a great time to start having these conversations with your spouse or significant other. Accountability can go a long way. These conversations may be difficult or even awkward at first, but they are well worth the hassle if both of you can get on the same page.

Asset Allocation in Your 30s

Your asset allocation is arguably the most important variable in the investing equation, no matter your age. It’s where the rubber hits the road between risk and returns.

Account for Your Risk Tolerance

Risk tolerance is the first place you should start. If you have some investing experience, you should have a feel for how risk affects you psychologically. Every single investor has a different level of risk tolerance. If you don’t know what your personal level of risk tolerance is, there are a couple of ways of finding out.

The first way is through skin in the game. All it takes is one bad streak in the markets to feel the pressure of over-extending your level of comfort with risk.

The second way is through taking some online risk questionnaires or assessments. If you do a quick Google search, you will find several that will gauge how much risk you are truly comfortable with.

Generally speaking, at the beginning of this decade, you’re still in a position where you can afford to be positioned aggressively (aka more equities than fixed income or cash in your portfolio), assuming that your financial goals are still years away.

That doesn’t mean that you should be reckless with risk, however. Remember, this is a critical period in your financial journey. While you have some room for error, you probably don’t have the luxury of blowing up your entire portfolio with risky trades, especially if you have several years’ worth of hard-earned invested dollars in your portfolio. The risks you take should be calculated, suitable, and responsible. Your strategy should mirror your risk tolerance and your financial objectives.

This is why planning is so important. Without goals, you are shooting in the dark.

Accumulation of Assets

If you’re in a position where you are still trying to accumulate assets for the future, “less is more” may go a long way for you. This means that you don’t have to have the sexiest portfolio. Consistency, along with great financial habits, will go a long way for you in this decade.

Speaking of the accumulation of assets, if you can diversify into real estate, it may not be a bad idea, as long as you’re knowledgeable as to what it takes to succeed in real estate. Real estate tends to be a non-correlated asset class compared to equities. It also carries the benefits of cash flow generation, leverage, and potential tax advantages.

Whatever assets you invest in, the principle remains the same: make sure you understand the underlying investment, the risk it carries, and what role it plays in your portfolio.

Emergency Savings Funds: Part of This Balanced Portfolio

A theme of this article has been the fact that life will happen, and will continue to happen even more throughout this time period. In a perfect world, you’d be able to plan divorces, job losses, major illnesses/ injuries, etc.

Unfortunately, we do not live in a perfect world. In an imperfect world, the best thing you can do is be proactive. While it’s not necessarily “investing,” one of the most proactive things you can do in your 30s is to build a healthy emergency savings fund.

A strong emergency savings fund is one that can fund your living expenses for anywhere from 6-12 months. Ideally, this is an account that you almost forget about. You should not see this as a liquid checking account; it should be for real emergencies only.

Why is this so important? One of the most detrimental things to a financial plan is having to liquidate assets at inopportune times (recessions, etc.). If you can build a sturdy safety blanket, you won’t have to rely on your invested assets when an emergency arises.

The best way to build an emergency fund is to include it in your budget. As mentioned earlier, once you decide to “pay yourself first,” it will become automatic. When you’re determining how much cash flow is available to invest after every paycheck, see how much you can dedicate to your emergency savings fund as well.

A Final Word on Investing in Your 30s

Your 30s can be a pivotal time in your life. With so much to consider and take care of at once, it can be challenging to stay disciplined. Even more than that, finding the time (and money) to invest regularly and responsibly in your 30s can seem nearly impossible at times.

However, your 30s are also a crucial time in your financial life. This is a time to get ahold of your debt, make real progress in your profession, increase your income, and start figuring out what you want to accomplish financially. If you aren’t planning and investing already, it’s not too late.

You should feel a little sense of urgency, as you aren’t getting any younger. Leverage the tools that are available to you, through your employer and otherwise. Make sure you are educating yourself on what it takes to accomplish your financial goals. Your goals are what should be driving the conversation from this point on. Stay committed to improving the quality of your financial life through this decade.

If you can do things the right way, take proper risks, and take the necessary precautionary steps, you can hit the ground running at the start of the next decade: your 40s.

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Jose Hernandez
Jose Rafael Hernandez is known as "The Millennial Money Mentor" on social media. He and his family are immigrants to the United States from Venezuela. The unique challenges that he faced at a young age taught him the real value of money and its importance in life. Jose studied finance at Mercer University, where he also competed in Division 1 Baseball. After his athletic career, Jose began his professional career in the finance industry. He started his career as a wealth management advisor for one of the top Investment Advisory firms in the US, where he was responsible for just north of $20mm in AUM. Jose currently holds the Series 7 and 66 licenses. Jose decided to leave the firm so he could have the freedom to create his brand on social media, geared towards educating millennials in the areas of personal finance and investing. His mission is to leave a positive impact on others while building his own legacy and providing for his family.

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