After the first taste of independence in teens and self earned money in twenty’s, thirty’s is the age which is an important landmark in everyone’s life. By the time one reaches 30, most people will be married, have a stable job, have decided whether to have or not have kids and how they want to live their life. One will also have an idea about spending and saving habits. Hence, in this article, I will share few Financial Tips for 30s.
Plan Your Future
This should be the first thing you should do when you reach 30. Plan what future you want. Do you want to settle in India or abroad, do you want kids or not, do you want to work till 60 or retire early, do you want a housewife or a working partner, do you want to buy your own house or stay in rented apartments, do you want to continue in job or start something of your own, do you want your parents to live with you after their retirement or not etc.
Answer to these questions should form the basis of how you spend the remaining life and what you should do from financial point of view.
Start Planning For Retirement
No matter what your aspirations are – early retirement or working till 60 -, 30’s is the age when you should start planning your retirement seriously. 20’s is the time when people normally spend a lot and no one thinks about saving for retirement. But once they cross 30, responsibilities fall on their shoulder. They have to look after family and children, pay loans, plan for short term and long-term goals. Somewhere among all these, retirement planning takes a backseat which is the biggest mistake many make.
As I explained in my earlier blog on 5 Secrets of Compound Interest, the magic of compound interest happens only in long term. You will loose out and never be able to catch-up if you start late.
So, start saving for your retirements immediately on turning 30 if you have not started yet. Invest in right products like stocks / equity MF which can help in growing your money. And ensure you keep increasing your SIP every year based on the salary hike you get. Do not stop retirement SIP no matter what.
Have An Emergency Fund
Since you will now have dependents and responsibilities, your expenses will increase on reaching 30’s. Hence, it is essential that you update your Emergency Fund accordingly.
The emergency fund should be sufficient to last atleast 6-8 months. You can park this fund in Balanced Hybrid Fund or Debt Funds to gain higher interest rates than bank deposits while keeping the risks row.
Make Children Higher Education Secondary Goal
Children higher education should be secondary goal depending on how much money is left. Primary goal should always be Retirement.
Do not play into the emotional angle of it being your responsibility to provide for children higher education and as a result give it more preference than retirement. Just remember that you can take education loan but not a retirement loan. And your children will have 40 years to earn and repay the education loan on their name.
So instead of spending all your corpus on children and then expecting them to look after you during old-age, better spend corpus on yourself and hire someone to look after you if your children don’t.
Convert Account Into Joint Account and Update Nominee
With the stress levels in today’s world, it has become very common for even 30 year olds to suffer from heart attacks.
Hence, 30’s is the time when you should start converting individual accounts into joint account (in either or survivor mode) and appointing nominee to everything you own. Having a joint account and nominee will help your family in case of your unfortunate and unexpected death.
Ensure that you convert and add nominee details for all accounts – Savings Bank, FDs and RDs, PPF, Locker, Demat, MFs, NPS, Insurance Accounts etc.
Write A will
It is essential that you write a will as early as possible. And 30’s is the right age for this as you are settled, have family and know whom you can or cannot trust.
Writing Will is not a very complex process as is the general misconception. Will can be written even on a simple piece of paper by oneself
Read my detailed article on How To Write A Will and 25 Things To Remember While Writing A Will.
We all work hard to ensure a better future for our loved ones. We save money, invest in stocks/MF and buy insurances so that our family members benefit from it after our death.
But have you thought what will happen if your family members do not know what you own? All your hard earned money will just keep rotting in unknown bank accounts and eventually go over to banks/insurance companies/mutual fund houses.
And this is a very realistic scenario. As per this article in The Hindu newspaper, money worth Rs 1,52,000 crore is lying unclaimed in banks, insurances and mutual funds in India.
This happens because as years pass, most husband and wife come to an understanding on what are each others duties. In most cases, wife takes responsibility of house and children while husband takes responsibility of managing finances, paying bills etc. And when husband dies unexpectedly due to accident or heart attack, wife does not know what assets and liabilities husband has, in which bank accounts the money is parked, how many FDs and insurance policy need to be redeemed etc. The result is banks/insurance companies/mutual funds benefiting from your money.
Hence, it is important that both members are involved in finances. Share all your financial details with spouse and make it a rule to refresh this data every year (maybe as anniversary gift to your partner).
Plan Alternate Source Of Income
30’s is the best time to start working on your alternate source of income. By now, you will have an idea of how good are you in your job and will you want/be able to survive in it for next 25-30 years or not. If the answer is No, start thinking of alternate options. Maybe start investing in your hobby to be able to convert it into an income source.
Be Ready To Spend On Building Your Skills
Remember -> Without investment, there is no benefit. You will have to invest both time and money to be able to start earning from it. For example, if your hobby is photography, just spending time to learn the course and money on buying the right camera, lenses and stands may not be enough. You will also have to be ready to spend money for getting visibility – by doing advertisements of your services in online and offline world, registering for various competitions and seminars where you can network with potential clients and network with peers, doing free shoots ,certifications etc, investing in creating your online presence – website, social media profile, higher ranking on google search, ads on Youtube or other places etc.
Get Adequate Insurance Cover
Most of us will buy Term and Health Insurance first time in our 20’s. And if we go by the rule of 70 with medical costs increasing at 10% pa, it will take between 7 years for inflation to reduce our Sum Assured by half.
Hence mid 30’s will be an ideal time to re-evaluate your insurance cover. Ensure that you have enough term insurance cover to meet your long term goals. And that you have enough health insurance (including a family floater plan) to take care of your health. If required, top up your insurance cover with additional policies.
Close Your Loans
As age increases, probability of health deterioration and job loss also increase. Companies can easily replace you with younger hires at less salary. It is also difficult to switch jobs at older age.
Hence, best thing for you will be to aim and close all your loans before you complete your 30’s. Live a loan-free life from 40 years onwards.
Tip – Focus on closing loans in decreasing order of interest rates – Credit Cards Loan – Personal Loan – Gold Loan – Vehicle Loan – Education Loan – Home Loan
Save Funds For Other Goals
Once you have taken care of Retirement, Emergency, Insurance and Self Development/Side Hustle goals, focus on how you can save for other goals. At 30’s, you are at peak of your career. You have decent work experience and are not too old. You can easily switch companies a couple of time and get good hike. Use the extra money to meet your goals.
Enjoy Your Life
Lastly, also remember to enjoy your life. In your 30’s, it can be very easy to get tied-up in all the challenges – office pressure, small kids, house responsibilities etc.
Inspite of all these, do ensure that you take out time to do things which give you happiness. Take leave from office to go on vacations, spend time on yourself, play games you like, do things you always wanted and enjoy your life. There is no point postponing all these stuff to after retirement as you do not know how your health will hold up then.
So these were my Financial Tips for those in 30s in India. Hope you found the article useful. Looking forward to your comments and feedback.