Financial Tips: 8 Key Things to Know by Age 30

For many, the twenties are a time to enjoy life, often leading to adventurous but questionable financial choices. While the arrival of your thirties doesn’t hold monumental social significance, it is typically the age by which society expects us to ‘get our act together’. This is often associated with reaching significant life milestones, such as marriage and starting a family.

These important life events become more attainable when our finances are in order. Establishing a strong financial foundation allows for a more secure and stable future. Here are eight financial essentials to get in order as you approach 30.

You Should Know Whether to Rent or Buy

Deciding whether to rent or buy a home is a critical decision every 30-year-old should consider. The choice between renting or buying a home is complex, with no universal answer, despite common advice like Uncle Bob’s pro-property buying stance.

Both renting and buying have their financial merits, depending on individual circumstances.

Considerations for Buying

When thinking about buying, you need to assess everything from the housing market conditions (are prices in your area inflated?) to your long-term commitments in that location (are you planning to stay put?). You can explore more factors affecting this decision here.

If you decide to buy, ensure you can manage the additional costs of homeownership, such as insurance, maintenance, renovations, and taxes.

Prepare an emergency fund to cover unexpected expenses, like sudden repairs or emergencies.

Considerations for Renting

For renting, ensure that your rent and potential increases do not surpass 30% of your net income, a widely accepted guideline for rental affordability.

While renting saves on many homeownership costs, it does not result in owning an asset.

Which is better? To understand which option might be more economically viable in the long term, consider using a rent vs buy calculator.

Breaking the Paycheck to Paycheck Cycle

Living paycheck to paycheck is a common scenario for many, often depicted in popular media as a normal part of young adult life – think Lena Dunham’s Girls.

However, existing from one paycheck to the next is far from ideal as you approach 30. It’s all too easy to fall into the trap of using credit cards and payday loans for quick financial relief.

What Can You Do About It?

• If your income is limited, begin by taking a detailed and honest review of your spending habits.
• Be ready to eliminate unnecessary expenses with determination.
• If you’ve already tightened your budget and find yourself short at month’s end, consider seeking a higher-paying job or starting a side gig (more on this later).

Building an Emergency Fund

Emergency funds are essential because, as the saying goes, the only constant in life is change. Life’s unpredictability means that despite your best plans, things can go wrong and they often involve unexpected expenses.

Imagine your car breaking down at the worst possible time, suddenly developing allergies, or your dog needing urgent care after eating your hidden chocolate (poor Fido).

What Should You Do?

Start saving now. It’s crucial to have your emergency funds in liquid form (easily accessible cash). If you haven’t started an emergency fund yet, aim to save at least $1000 initially.

Managing Your Debt

Debt, particularly student loans, is a common burden, with 7 out of 10 graduates carrying some form of debt post-graduation. Credit card debt and the need for payday loans are also prevalent, both of which come with high interest rates.

The average credit card interest rate is around 15% according to Creditcards.com, while payday loans can have annual interest rates as high as 582% in some states like Idaho according to USA Today.

The current financial system unfortunately makes it very costly for those less affluent to escape debt.

What Should You Do?

Finance expert Dave Ramsey recommends the debt snowball method: start by clearing the smallest debt first and then move on to the next smallest, creating momentum as each balance is cleared.

Expanding Your Income Streams

For those actively working on their savings or debt repayment plans, it’s wise to consider multiple sources of income. Welcome to the world of side hustles, a vibrant part of the freelancer economy that is currently thriving.

The options for earning extra money are vast. You might need to take some time to focus on just one or two that fit your skills and interests. Opportunities vary from freelance writing to design, and even unique gigs like dog-walking or house-sitting.

What Should You Do?

Explore lists of side hustles that are easy and affordable to start (here’s one list). Identify a few that might work for you, then begin offering those services to people you know.

After a few months, evaluate and discontinue any side hustles that aren’t profitable enough; concentrate on the ones that are successful. Improve your skills in these areas to potentially increase your rates.

Preparing vs. Buying Meals

Food is a basic necessity, yet the economics of preparing versus buying meals can vary. While the common advice is to cook at home, there are times when buying meals might be more economical.

Perform a cost analysis to see what’s best for you. For example, if your side hustle earns $100 an hour and cooking takes 2 hours, it may be more sensible financially to earn $200 instead of saving on a meal.

However, for most people, cooking at home is generally more cost-effective. Buying pre-prepared meals can also include hidden health costs – such as increased risks of diabetes and heart disease due to unhealthy ingredients.

What Should You Do?

Adopt frugal cooking techniques like slow cooking, meal prepping, and a mainly vegetarian diet, which are easy to learn. BudgetBytes offers great resources for starting.

Cooking in bulk can save significant time. Preparing multiple meals in a few hours and storing them for the week can free up more time for earning additional income, while still ensuring high-quality meals.

Financial Considerations

Is choosing a life partner also a financial decision? Absolutely. Money issues are a top reason for disputes among couples – a survey revealed that 70% of couples argue about money more than other topics.

It’s not advisable to end a relationship over financial issues like student loans or poor credit scores, but these are not factors to overlook. They can significantly influence your ability to achieve financial stability, start a family, or buy a home.

What Should You Do?

If you are in a relationship, it’s essential to engage in a sincere and thorough discussion about finances, covering topics such as:

• What are their views on money management?
• Do your spending habits align?
• Is there an unmanageable shopping habit that could strain your finances?
• Consider future health needs – will they require substantial medical planning?

For advice on how to approach financial discussions with your partner, check out this resource: Handling Money Talks with Your Significant Other.

The Importance of Paying Taxes

As contributing members of society, we all have the duty to pay taxes. Avoiding taxes is not only illegal, but also ethically questionable as it impacts the nation’s development.

While no one enjoys paying taxes, especially those critical of the tax system, we’ve all benefited from previous generations’ tax contributions. Whether it was attending public school, enjoying public parks, or driving on highways, these are all funded by taxes.

What Should You Do?

Paying taxes helps support future generations, but if you need further convincing on the importance of tax contributions, you can find more information here. Additionally, here are some tips to simplify the tax filing process.

Conclusion

Becoming an adult means realizing that following financial advice is up to you; no one else will do it for you. There are no punishments or stern warnings to coerce you into making wiser financial decisions.

It may be a challenging path for some, especially those in environments that do not promote financial success. This is why it’s called self-improvement.

Remember: Money is a tool. Some may feel they are naturally not good with money, but this is a misconception. As humans, we excel at using tools. You can learn to manage your finances effectively. Now, it’s time to take control and master your financial destiny.