By the time you hit your 30s, you would see some of your friends already settled, some still exploring new jobs, some starting their family and some already saving for retirement. While the definition of financial freedom may differ for each individual, 30s are an important period in life to start taking big financial decisions and investing in your future. Especially if you found it hard to stay afloat in your 20s, it is high time to develop the right habits and take your finances seriously. Financial marketplaces like Paisabazaar.com can also be quite helpful in guiding you towards achieving your financial goals.
So, if you are in your 30s, here are some of the most important financial steps to take that will put you down the right path and make you financially stable in the long run.
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Get out of the debt cycle
In our early 20s, most of us are reckless with handling credit and, sometimes, we learn the ropes of using credit by incurring some debt. However, if a major chunk of your income still goes towards paying off debt, now is the time to get out of this vicious cycle. The three most common types of loan that people have in their mid and late 20s are student loans, credit cards and personal loan. Among these, credit card debt has the tendency to rise at the quickest pace, as finance charges are applicable on the unpaid amount as well as new transactions, until you pay off the total dues in full.
If you find yourself in such a situation and you are finding it difficult to pay off other loans as well, you should consider debt consolidation to make payments easier. For example, you can take a personal loan to pay off multiple credit card debts. Not only will it be easier to manage one debt instead of multiple but you will also save a considerable amount on interest and other charges.
Revisit your budget
You cannot work with the same budget or financial plan throughout your life. In your 20s, you may have put aside a higher amount towards recreation or vacation. However, as your lifestyle changes and new financial responsibilities make their way into your life, you will need to alter your budget to accommodate additional expenses.
For example, if you are starting a family, you may have to set aside a good portion of your monthly income towards childcare. Similarly, if buying a house were in your near future plan, you would have to save up for the down payment and other miscellaneous expenses that may arise. However, tweaking your budget does not mean that you should compromise on the things you like. You should see where you can limit expenses and work accordingly.
Set short-term and long-term goals
As you advance in your career and life, the short-term and long-term goals in your life will also change. This is why, in your 30s, it is important to take a fresh look at your long-term goals- whether you would be more inclined towards saving up for retirement or set aside an education fund to send your kid for studies abroad. At the same time, you should focus on short-term goals such as buying a car or moving to a new city or even saving up for a vacation. Setting specific goals helps you see more clearly through the financial lens.
Save up for emergencies
Job losses during COVID-19 left millions of people in a financial crunch, thus making an emergency fund even more crucial. You should have saved at least 6 months to 1 year of your monthly income so that unexpected expenses do not run your bank account completely dry and do not push you into debt. Even if you have been setting aside a particular amount each month for the last few years, when you hit your 30s, you should again look at how much you have saved so far.
Start investing right
While most people want to invest in their 20s, with limited income and rising expenses, it becomes difficult. However, by the time you reach your 30s, you would have a stable job and a higher income, giving you room to dedicate excess cash towards building an investment portfolio. You could start with something simpler such as mutual fund SIPs wherein you can choose to invest a small amount per month. Check www.pbskids/activate.
With rising income, you would also have to bring tax saving into consideration, which could be another investment regime. National Pension Scheme (NPS), Public Provident Fund (PPF), Tax Saver Fixed Deposits, ULIP, etc. can be good starting points for your investment. At the same time, securing the future of your loved ones is equally important, necessitating life insurance and health insurance. Insurance does not only come as a cushion in case of an emergency but also helps you save taxes.
In addition to all this, you should focus on advancing your career in your 30s, as you would have significant experience to excel. Reach for a higher pay, take risks but be financially prepared for unforeseen circumstances. As said above, financial planning works different for everyone and you should experiment to find the right balance that suits your finances.
