Meet Clint. Clint is the CFP behind NextGen Wealth. I’m in my 30s, so I was anticipating reading this article myself. Give it a good read–there’s a lot of information to think on in here!
Many consider your 30s to be the “real” adulting stage. It’s when you really start to develop a sense of responsibility and strategy on how you will live your life in the next couple of decades. That’s why it’s absolutely crucial that you identify and apply solid money-management principles during this time. Here are five ways you can secure better financial health for today and in the future.
Improve your earning capacity
Acquire the necessary skills
What’s the best way to hit your financial goals faster? Earn more. And to earn more, you have to be the best guy for the job.
How to do this? By continuously learning. Develop your skills and add new ones. Volunteer or sign up for training and seminars. Get certified, expand your skill set and branch out to other related disciplines.
Companies reward people who are great at what they do. And, even if you don’t get promoted during your stay there, you’ve increased your market value and will now be in a position to demand better pay on your next job.
Get a side hustle
If you can’t get promoted or get a pay raise, why not get a side hustle? For a few hours a week, you can earn some extra money and build up your assets faster. Job marketplaces like UpWork and Fiverr are quick ways to get started.
And, there are specialized talent marketplaces to discover that can pay better depending on your specialization. The lesson? Make better use of your time. Not only do you earn extra, but you also develop your freelancing skills.
Stay clear of debt
Live below your means
How do you avoid debt? Simple: Don’t buy stuff you don’t need. You’ll be surprised to learn that many of the things you own are spur-of-the-moment purchases triggered by dopamine.
Let’s face it, there’s always that “shiny new thing”. Apple will never stop selling new iPhones every year. Amazon is a rabbit hole that will take away precious money and hours of your day if you let it.
Automate your payments for credit cards and bills. Prioritize high-interest debt and set aside a fixed amount for payment on a regular basis. Why do this? Setting up an automatic system reduces friction in terms of paying debt on time.
This mindset applies to the opposite end of the spectrum. If you want to purchase something (discretionary expense), use cash. Using cash increases the friction of parting with your money, simply because the very act of handing over physical bills make us “feel” the loss more.
Think about it, why do you think Apple Pay and Amazon One-click were implemented? Efficiency and convenience? Sure. But it also reduces the effect of what psychologists call “coupling”, which states that the value of experience from a product/service is tied to the act of paying for it.
So if you opt to pay with cash for the latest iPhone, you’ll feel the crunch more because you part with your money right away. The experience brought about by owning a new phone is directly linked to how you pay for it. Used strategically, you can discipline yourself to avoid unnecessary purchases which lead to debt.
Start preparing for retirement
Nail down the essentials
It would be unwise not to take advantage of your employer’s 401k plan. Tax benefits, employer matching, access to loans, and protection of funds from creditors are just some of the benefits of having a 401k.
If you can, set up a Roth IRA too. You’ll have tax-free income during retirement and also have the option to withdraw funds during times of need.
You should also consider getting a health savings account when possible. Here are some of its benefits: Pre-tax contributions, tax-free withdrawals and earnings, portable, and provides you with funds for medical purposes.
What’s the point of utilizing these investing tools? As you reach your 30s, your income will generally be higher than when you were starting. New skills, promotions, and accumulated job experience should have increased your market value and your potential income along with it.
It’s the best time to start saving for the future. Don’t spend it on stuff that doesn’t provide value in the long run. Instead, invest it and let it grow to build yourself enough assets for the future so you can achieve your goal of financial freedom.
Build better money habits
Think before you spend
Start by making a weekly/monthly budget. Identify your discretionary and non-discretionary expenses. Track your spending. You’ll be surprised how much you spend on things when you start to track them.
Set budget goals and reward yourself when you hit them. For example, you can treat yourself to a movie if you were able to skip Starbucks for a week. This way you won’t feel deprived and actually look forward to saving since there’s a reward when you accomplish it.
By being conscious about our spending, we stop acting on emotions alone which is the number one reason why people spend too much.
Automate your savings and payments. Use cash for discretionary expenses. Always be conscious when it comes to spending. Make sure that it fits your budget and aligns with your goals.
Consider getting outside help
The right person can help you reach your goals faster
Picture this: You realize you want to take better care of your health and decided to sign up for a gym. The first time you enter, you see all sorts of equipment. Barbells, elliptical machines, treadmills, kettlebells—Where to start?
If I wanted to build the muscles on my upper body, which type of training should I focus on? What if I wanted to focus on losing weight? Which machine and exercise are perfect for achieving that goal faster?
What do most people do when faced with this dilemma? That’s right—approach and seek help from a personal trainer. When it comes to building your financial muscles, the same principle applies.
Deciding to be financially-fit is the first step. You’ll improve a lot simply by applying the tips we mentioned above. But what if you want to take it to the next level? What if you want to reach your goals faster, make sure you’re doing the right things and moving in the right direction?
Like gym instructors, financial planners help you pick the right tools and advise you on the strategy to take for a specific financial goal. Instead of trial and error, you get to start on the right path immediately.
Like a gym coach, a financial planner is someone who gets you on the right program so you maximize the use of your time and energy (in this case, your money) and reach your targets faster.