Your 30s can be an exciting but challenging decade. While you may be advancing your career and earning more money, you’re also likely juggling more financial responsibilities.
Many in this age group are married, given the median age at first marriage is in the late 20s, according to the U.S. Census Bureau. Parenthood may also be a reality, since the average age for women having their first baby is around 26, the Centers for Disease Control and Prevention reports. And don’t forget the house — the median age for first-time home buyers is 32, according to the National Association of Realtors.
How to handle all of this financially can be a bit overwhelming, says Brian McCann, founder of Bootstrap Capital LLC in San Jose, California.
“The bigger the life challenge, the more likely that we have not been trained for it,” says McCann, a certified financial planner who works primarily with clients in their 30s and 40s.
Invest beyond your 401(k)
Save for retirement. You hear it over and over because it’s really important. And with the benefit of compound interest, the earlier you start, the better. You may also have heard that if your employer offers a retirement plan, you should take advantage of it. But beyond that?
“The majority of my younger clients know contributing to their 401(k) or company-sponsored plan to at least receive the company match is a great idea,” says Sam Farrington, a financial planner in Omaha, Nebraska, who writes about money and minimalism at the blog Add By Subtraction. “But many are unsure of what to do after that. Should you completely max out your 401(k) or instead invest a portion in a Roth IRA?”
One approach Farrington recommends is to first ensure you receive the full company match on your 401(k), and then contribute as much as you can to a Roth IRA. The annual maximum is $5,500 for those who fall within the income limits — currently $118,000 for those who file as single and $186,000 for married couples filing jointly. If you are over the IRA limit, divert your contributions back to the 401(k).
This approach assumes you have a company-sponsored plan at your disposal. If you’re among those without one, open an IRA on your own via an online broker. Robo-advisors like Betterment and Wealthfront use an algorithm to build and manage your account, automatically investing for you based on your age, retirement goals and risk tolerance. That tolerance should be high in your 30s, when you’re still a few decades off from retirement.
Regardless of your plan, contribute what you can afford and bump up the amount as your income increases — adding a percent or two each time you get a raise — with a goal of setting 10% to 15% of your annual income aside for retirement.
As you earn more, set priorities
In addition to increasing your retirement savings as you make more money, be sure to keep your spending in check.
The average monthly budget for those 35 to 44 years old is $5,445, compared with $4,339 for those 25 to 34, according to an analysis of Bureau of Labor Statistics data by Bank of America.
Don’t fall into the trap of spending more just because you earn more. Instead, be intentional about your spending. Work with your partner, if you have one, to determine what is important to you and your family.
“Come up with five or six things that are really important,” McCann says. “That makes setting up your finances easier. There will inevitably be trade-offs, and you can always bounce them off your values.”
A certified financial planner can help you set up a plan that takes into account your financial priorities.
Savings should be among those priorities. If you don’t have an emergency fund, start there.
It can take a while to fully stock your emergency fund, so work in increments. Aim for $500, then $2,000 and eventually build it to cover three to six months of living expenses.
This will help you focus on other goals, like saving for the down payment on a new house or for college if you have kids. You should do this while also saving for retirement.
“When you get into your 30s and 40s you need to juggle multiple financial goals, and that’s really tough to get your head around,” McCann says.
He recommends using separate accounts for each goal. So an online savings account for your down payment or home repair fund, another for a new car and a third for your dream vacation.
“You can measure progress against a specific goal,” McCann says. “It’s great positive reinforcement.”
Try to kick college savings into gear as soon as you have kids, using a 529 plan or other tax-advantaged plan. With an IRA, for example, you can take out money for qualified education expenses without penalty.
Like retirement savings, the sooner you start the more time your money has to grow. So contribute what you can, without sacrificing retirement savings, to get the most mileage out of your savings. Remember: Your kids can fall back on student loans if necessary; your retirement can’t.
Evaluate your insurance coverage
No one wants to think about the worst-case scenario, but planning for it can make life a little easier should it occur. That’s where insurance comes in.
“I think the biggest thing is the disability insurance for someone in their 30s,” says Tracy St. John, a financial advisor and founder of Financial Avenues LLC in Kansas City, Missouri.
Most disability insurance offered by employers pays 60% of your base salary if you are too sick or injured to work. For many people, that’s not enough.
To figure out what you need, St. John suggests evaluating current income and future financial goals. Then, look at what your current disability plan would pay. If there’s a gap, consider purchasing additional coverage now.
“As you get older it’s going to cost you more,” she says.
Purchase only what fits within your budget, but choose a plan that allows you to adjust coverage as your income increases.
Adding life insurance can also be a smart move in your 30s, even if you have coverage through your employer, St. John says. Like other policies, life insurance gets only more expensive with age.NerdWallet makes managing your money easy with a single view of your finances. Sign up for free.