With higher wages and more advanced career opportunities, individuals in their 30s are poised to begin building wealth for their future, including retirement.
According to the U.S. Bureau of Labor Statistics, the highest earning years in life are between 35 and 64. A recent report also suggests that college-educated workers tend to experience salary growth throughout their 30s before it starts to peak—for women, in their early 40s, whereas men’s plateau near their 50s. This makes thirty-somethings well-positioned to begin building wealth for retirement and other financial goals as they advance in their careers.
Of course, there’s no shortcut to get there. Long-term investing typically requires a solid plan to achieve a fully funded retirement.
Wondering how to build wealth in your 30s? Here are 10 steps that may contribute to lasting wealth over time.
1. Monitor credit scores
As people navigate their 30s, they’re likely to finance bigger purchases such as a home or a new car. Credit scores play a major role in qualifying for these loans and securing the best interest rates possible.
A higher score results in a lower interest rate—which is important because even a fraction of an interest point can add a lot to the cost of a loan. For instance, a $350,000 mortgage with a 3% interest rate would cost about $181,221 in interest over 30 years—on top of the purchase price. With a 3.5% interest rate, the same mortgage would end up costing nearly $216,000 in interest.
Monitoring one’s credit score will help ensure a lower rate when shopping for financing.
2. Boost emergency savings
An emergency fund is crucial for managing unforeseen events, whether it’s an expense or a loss of income. At the start of the Covid-19 pandemic, for instance, 40% of people with an emergency fund dipped into those accounts, and more than 73% used up more than half of their savings.
Since it’s common for one’s lifestyle to increase alongside one’s salary, 30-somethings may also want to keep tabs on their budgets and make sure their emergency fund could cover 3 to 6 months of their current expenses in case of a job loss. A simple annual or biannual financial check-in can reveal if an emergency fund fits their needs.
Another consideration is how many people that emergency account needs to cover. Individuals in their 20s may only have themselves or a spouse to worry about, whereas growing families may need a bigger emergency fund to cover an array of surprises, sometimes in the same month.
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3. Evaluate long-term goals
One major component of how to grow wealth is creating a financial plan. There are a number of goals a 30-something may be saving toward at this stage of life, such as retirement, college for children, or buying a home. In addition to savings goals, 30-somethings may also decide to pay off student loans or credit card debt. Listing priorities can help with decision-making, especially when there’s an unexpected windfall such as an inheritance.
4. Start a retirement account
Opening a tax-deferred account and making regular contributions are the first steps towards saving for retirement. Workplace plans are one place to start, especially if an employer match is available. Retirement accounts are also available outside of the workplace. A traditional individual retirement account, for example, allows for a tax deduction on qualifying contributions.
Starting early is key to success. Say a 35-year old starts investing $500 a month in a traditional IRA until they turn 67. Assuming an average annualized return of 8%, that account would be worth nearly $1 million by retirement. By contrast, a 45-year old who starts investing the same amount each month would only have an account balance of $390,000 by the same retirement age. That’s a huge lifestyle difference.
If you’re looking for a long-term investment strategy, we’ve got you covered. Titan’s award-winning, expert-managed portfolios offer investors of all income levels the potential to grow their wealth over the long-term. Why wait? Sign-up takes less than five minutes.
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