5 Money moves to master in your 30s for a guaranteed debt free life

by Andy Masaki

Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.

–Franklin D. Roosevelt

When in your 30s, you start getting the hang of life. At this age, you take home a bigger paycheck than your 20s. After some trial and error, you’re managing your finances better. Still, you maybe in some kind of a financial rut. You deal with financial challenges like student loans, credit card debt, mortgages, and childcare, but also dream of striking gold in the future.

However, your retirement funds in 401(k) is insufficient - lower than what you had hoped for. Being in your 30s, you’ve got age on your side. It’s never too late to start afresh.

So, here are the crucial money moves you should master well within your 30s to blaze your path to financial nirvana.

Money Move #1: Be Debt-Free Most of the Time

Money is a terrible master but an excellent servant.

– P.T. Barnum

By now, you may have paid off a part of your college debt or your credit card debts in full. But, if you haven’t, then it’s not too late yet to get serious about fulfilling your outstanding financial obligations diligently.

Make extra payments towards your highest-interest revolving debts like credit cards. Allot that same amount to other credit accounts, once the costlier ones have been wiped out. Keep your credit card balances under 30% of the available credit limit. It’s important, particularly, if you’re planning to take out some more loans in the future.

The reason is credit card balances surpassing credit limits will hurt your credit score.

It’s good to pay off your debts in full, especially costly ones like credit cards. To figure out how much you’re required to pay each month, you may use an online calculator to pay off debt. During your 30s, you should have mastered the habit of repaying all your outstanding credit card balances completely every month. Instead, use your credit cards to earn more perks and rewards. For example, your smart credit card use could qualify you for free flights, shopping discounts, and other incentives. With no credit card balances to juggle, you’ll save a lot on the interest paid towards them and shore up your credit score overtime. The icing on the cake is your life would be a lot stress-free.

Moreover, you’ll be able to qualify for more affordable rates on other loans. You can refinance your student loan or mortgage and reduce your interest rates by having a good credit score.

Money Move #2: Prepare for Old Age Medical Costs

A hospital bed is a parked taxi with the meter running.

– Groucho Marx

At 30s, you may have lower health problems than your elder counterparts and so, you may have to pay lesser for health-related costs. To take advantage of your good health, you can use a Health Savings Account (HSA) to buy a high deductible health insurance coverage. HSA allows to save pre-tax $3,350, if you’re single and $6,750, if you have a family.

HSA don’t come with an expiry date like Flexible Savings Account. The funds you save in your HSA can be used for investment purposes without attracting taxes on any capital gains you make when withdrawing the funds from them. However, you’ll have to use the withdrawn dollars on qualified health-related costs.

During your golden days, you’ll have a separate fund, particularly dedicated, to cover your healthcare costs.

Money Move #3: Never Spend More than You Earn

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.

–Edmund Burke

With increasing paycheck, don’t let your lifestyle inflate. Spare the horror! Don’t be impulsive and get carried away. Ask yourself,”Do I really need to buy a house with 6 large bedrooms?’ or ‘Is that Porsche the ultimate to my happiness?”

If you’ve got the finances to cope with, then go for it, but not at the pyre of a financially secure retirement. You may lead a seemingly luxurious life in your 30s, however, you may ask yourself “Do I have the appropriate financial resources to retire at the age I’ve planned to?”

Money Move #4: Raise an Emergency Fund, as if Your Life Depends on It

Let him who would enjoy a good future waste none of his present.

–Roger Babson

Saving right from your early 20s is commendable. You’d feel safe to have a few thousand dollars stashed away in the bank that would cover a couple of months’ living costs. However, in your 30s, creating a financial cushion becomes all the more imperative, especially when your responsibilities have grown, alongside your paycheck.

You need to think of paying for your children, mortgage, and other unplanned expenses. Having at least six months’ worth of living costs saved as emergency fund is always a smart move and must be mastered at. There’s no cap as to how much an emergency fund should be. It’ll depend on your financial health and your circumstances.

Suppose, if your source of income is uncertain or erratic, then you’d need a larger savings to cope with the emergency costs without borrowing heavily. Similarly, your emergency fund should be bigger, if you have mortgages to pay off. But, that isn’t true, if you have fewer financial responsibilities to deal with.

Money Move #5: Create an Enviable Portfolio

Money is usually attracted, not pursued.

–Jim Rohn

Lastly, 30s is a suitable time to begin your wealth generating drills. Besides your home and retirement investments like Individual Retirement Account (IRA) or 401(k), there are other financial options which you may have to explore. This will help you to diversify your nest egg and achieve greater financial stability.

You could float a startup venture or create a stock portfolio with the help of a seasoned financial guide. Before you work with a financial advisor make sure he/she has passed the acid test to provide you with the investment ideas and assistance. Ideally, you should work with a Certified Financial Planner to avoid being scammed.

You could invest in a 529 savings account to pay for your child’s tuition. It’s one of the basic college savings 101 moves you may make for your child’s brighter future. Another lucrative alternative you can tap, as a beginner, is the index fund. You can actively participate in the stock while keeping your risks low and even rebalance your portfolio from time to time. Many financial advisors asks their clients to wait for at least 5 years before liquidating their assets. It’s good not to invest any money, if you need them in the near future.

Andy Masaki is a freelance journalist living in Oakland. He works for Oak View Law Group, a leading consumer and bankruptcy law firm based in CA and operational across US.