Your 20’s went by pretty quickly and your 30’s certainly aren’t going to move any slower. As we mentioned in our post about the 20’s, many of the decisions you made in your 20’s are going to set the tone for the rest of your life. Whether you made good decisions in your 20’s or not, your 30’s are a time where a lot of things start to come together. You still have enough time to make up for any bad decisions you made in your 20’s and you can also make some smart decisions that will pay off for you in the long term.
There are many things to think about in regards to investing in your 30’s. First and foremost, if you started investing in your 20’s, your balance in your investment account may be very significant to you relative to where it was when you started contributing. Since investing moves in percentages, the swings in your account will be larger. For example, a 10% move in your account when it was worth $1000 would be $100. A 10% move in your account if it is worth $100,000 would be $10,000. Markets don’t go up or down in a straight line. There will be plenty of moves like this in your account over a 30- or 40-year time horizon. You have to be prepared for them and focus on the long term rather than trying to time the market. Furthermore, you should really take the time to think about the risk you are taking and make sure that you construct a portfolio that meets your objectives.
Your 30’s are also a time when your career should really be coming together. You may be advancing at the company you are with, starting your own company or moving on to a new company. If you leave the company you’ve been working with, you’ll have some decisions to make with your retirement account. Don’t get caught up in everything else and forget about your retirement account.
You may have gotten married and started a family or are planning to at this point. It was pretty easy to max out your 401(k) when you were only worrying about yourself. Now, you may have some other priorities like saving for college. While we are strong advocates for 529 plans, we don’t think you should lose sight of saving for retirement. You need to really prioritize and there is no perfect answer. Do you want your children to have some student loan debt if it means you could retire comfortably? Do you want to pay for college completely even if it means you have to work longer? Regardless of your answer to these questions, if you have any plans to assist your children with college, saving early in some way for it will pay off for you when the time comes.
While your estate planning may not yet be very complex, it is still very important at this point in your life, especially if you have children. At the very least, you and your spouse should have wills in place with guardianship provisions for your children in case something were to happen to both of you. While it is a difficult topic to think about, it is a decision that you should make. You should also make sure you have beneficiaries named on all of your accounts.
Another thing to think about that you don’t want to think about is life insurance. You should take the time to determine how much life insurance you need and then decide which type of life insurance is best for you.
One great trick to saving for retirement, college or just saving in general is to live off of your salary and invest your bonuses. Maybe you are contributing the maximum to your 401(k). If so, you can invest your bonuses in a 529 or a brokerage account. You also may want to think about whether or not a Roth IRA or Roth 401k contributions make sense for your situation. While these big issues like your retirement, your children going to college and your estate planning seem far off, they will sneak up on you very quickly. It is critical to take these items seriously at this point in your life. Take the time to do some planning, put together a balance sheet and think about these important topics. If you set the tone while you’re young and have time, the flexibility that it will afford you in the long term will be priceless.