When you hit the age of 30 you have to start taking your finances more seriously, especially if you are an impulsive shopper, tend to max out your Credit Cards and live like there’s no tomorrow. This is the time to clean up all your financial excesses and prepare for the major goals that lie ahead of you.
As you grow older, your income will increase and so will your expenses. You have to spend wisely and invest wisely to build wealth and have a secure future.
Additional Reading: Retirement planning for everyone
Here a few steps you need to take in order to secure your financial health:
- Plan for retirement
People often procrastinate when it comes to planning for retirement, assuming it’s too early to worry about it. While it may be true that you have time on your side, the earlier you start investing, the more time you give your investments to grow.
For example, at the age of 30, if you make an investment of Rs. 1 lakh in a Mutual Fund growing at 15% annually, you would get Rs. 16 lakhs when you reach 50 years of age. On making the same investment at the age of 40, you would get returns of only Rs. 4 lakhs when you turn 50.
Delaying would imply the need to invest in riskier assets, aiming for a reduced corpus and an increase in the number of years till retirement. Also, consider the impact of inflation on the corpus when you calculate the amount you would need after retirement for your regular expense.
Additional Reading: Invest Early, Retire Early
- Choose your investment assets carefully
You can opt for an aggressive portfolio in your 30s by going in for stocks and Equity Mutual Funds but make sure you rearrange your portfolio from time to time to suit market movements.
You must diversify your portfolio to reduce risk. Invest in liquid assets to meet short and medium-term goals such as going on a trip or buying a car. When you pick an asset, calculate the effective returns after tax deductions.
Additional Reading: Intelligent Asset Allocation
- Create an emergency fund
Once you have your goals in place, you might want to save part of your income for emergencies such as job loss, illness, accidents etc. An emergency fund is often ignored in financial planning, but it’s a must have to keep you going during an emergency. An ideal fund is worth six to eight months of your expenditure.
- Keep spending under control
It’s time you got rid of your habit of overspending if any and keep expenses within your means. Create a budget to keep spending under control. This will help you understand how things add up.
- Pay off Loans
Sometimes borrowing can be necessary to meet your financial goals, but make sure you have proper repayment plans in place. Timely repayments can help you focus on other investments and improve your Credit Score.
Make sure you don’t get into more debt when trying to clear other debts. In your 30s you have the time and the flexibility to build a corpus for a secure future. Start now, start small, scale up, and reap the power of compounded growth.
Keep these financial tips in mind and you’ll be roaring through your 30s ready to take on anything the future may throw at you.