- When you’re in your 30s, paying off high-interest debt is one of the best ways to invest your money.
- You could significantly increase your income during this decade, so be open to investing in career development opportunities.
- Use at least 10% of your income to build a retirement fund and make sure you have all the insurance you need.
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Your 30s are an exciting and pivotal decade. You’ve had time to establish yourself as an adult and start building your career. In an ideal world, you would regularly save and invest money. But if you haven’t done so yet, it’s still early enough to get you on the right track without too much trouble.
Where you put your money right now is crucial because it can either set you up for success or make your life harder as you get older. To help you out, below are the best investments for 30-somethings.
Note that this will be a general overview of how to get the most out of your money. It won’t cover specific businesses or assets to buy, but rather how you can use your money in a way that improves your finances and your life as a whole.
1. Pay off high-interest debt
Although it’s not the first thing that comes to mind when you think about investing, paying off expensive debt is one of the best investments you can make. There’s no classic definition of high-interest debt, but anything with an annual interest rate of 10% or more will do.
For many, the main culprit here is credit card debt. Overall, Americans have nearly $1 trillion in credit card balances and the average interest rate is over 20% per year.
Look at it like this: if you get rid of credit card debt with a 20% interest rate, that’s like getting a 20% return on your money. You won’t find any other investment that can reliably provide you with this kind of return.
2. Career development
Your income is one of the most important factors in your financial success. The more money you earn, the easier it is to pay your bills and have leftover funds to spend on your goals.
Average income increases until middle age, and it increases a little for Americans when they are in their thirties. With the right decisions, you could significantly increase your income during this decade of your life. To give yourself the best chance, it’s worth looking for ways to invest in your career. Here are some options:
- Further your education through a diploma or certificate program. More educated adults earn more on average.
- Take a course related to your career or learn skills that could benefit you professionally. For example, if being bilingual helps you, invest in tools to help you learn another language.
- Work with a coach or career counselor. You can also spend time with mentors to learn from them.
3. A pension fund
Waiting to save for retirement is an all-too-common financial mistake. To show how expensive the wait can be, suppose two people are saving $1,000 a month for retirement. They get an 8% annual return because they invest in stocks, which is the stock market average. The only difference is that one starts investing at age 35 and the other at age 50.
At age 65, the investor who started at age 35 will have $1,490,359. The investor who started at age 50 will have $346,038. Those 15 years cost over $1.1 million.
You are still young, so take the opportunity to invest at least 10% of your income towards retirement. Here are the most popular types of tax-advantaged retirement accounts that help you save on taxes while building your nest egg:
It is important to have insurance to protect you from major expenses. There are many types of insurance, and at a minimum, every adult should have:
- Health insurance
- Home or tenant insurance
- Car insurance (if you drive)
Depending on your situation, you may also need other types. For example, if you have a pet, it is good to have pet insurance. If there is someone who relies on your income, such as children or a spouse, then life insurance is a must.
With respect to life insurance, it should be mentioned that insurance sellers often market whole life insurance policies as an investment. For most people, whole life insurance isn’t worth it. Term life, which lasts for a fixed period, is better suited because the premiums are much cheaper.
As you age, it becomes even more important to use your money wisely. Now that you’re in your 30s, focus on aggressively paying off your high-interest debt. Don’t be afraid to spend your money on things that will benefit your career, and be sure to save for retirement every month, too. Finally, think about the insurance coverage you need to be protected in the event of a claim.
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