Your 30s are an interesting decade marked by milestone life stages. You might still be single, getting married or starting to raise a family. This is also the time when you begin establishing yourself in your chosen career or start working in different jobs to find your niche. As you navigate these changes, it’s important to have an understanding of financial milestones you’ll want to work toward too.
A recent GOBankingRates financial literacy survey revealed that one-quarter of surveyed Americans do not become comfortable with basic money skills until they are 30 or older. So that you’re ready to make bigger financial decisions in your 30s, here are financial skills you should understand by 30.
Tanya Peterson, vice president of brand at Freedom Financial Network, said that the skill in creating and using a simple, basic budget contributes to financial literacy by ensuring you know your total income and total expenses. Once individuals are able to align income, expenses, savings and goals, they may set priorities and differentiate between wants and needs.
One of the reasons why it is often so difficult to master budgeting is because many view it as a restrictive tool. Peterson said the intention of a budget is to help you spend your money according to your goals.
Take the first step of carefully considering and setting financial goals. Then, build a budget around these goals and modify accordingly.
Peterson uses the example of buying a house as a goal. Your initial goal may be to buy a house in the next two years. However, you may modify this goal to purchase a home within the next five years to better track with your budget and its needs. Careful budgeting and setting goals will help you stay on the right track and get you where you want to go.
Saving money is not a one and done situation. This is an ongoing money skill that leads to a habit of saving money.
“Creating a habit of savings contributes to financial literacy by understanding that expenditures should be tied to goals – for which you must save – and in understanding that unexpected expenses come up for everyone; the key is to be prepared for them,” Peterson said.
If you want to get into the habit of regularly saving money, Peterson recommends automatically depositing a percentage of your regular paychecks into your savings account. The general recommendation is this should be 10% of your net income — a little more if possible or less if need be.
Keeping an Emergency Fund
Amy Maliga, financial educator at Take Charge America, said a key skill in achieving financial stability is getting in the habit of saving for emergencies.
Maliga said that while specific emergency savings amounts vary based on personal income and family size, the recommendation is to save up to six months of living expenses in this specific account. If you’re starting from scratch, Maliga recommends making it a priority to reach a $500 cushion and keep building from there.
Emergency savings, similar to a regular savings account, are not a “fill it once and walk away” situation. If you need to use these funds, dip into it only for a true emergency like a sudden illness or necessary home repair. Once you dip into the funds, replace them as soon as you are able to save money again and continue putting aside savings for this fund.
Responsible Credit Card Use
Once you are 30, you should have a handle on responsible credit card use. Peterson said this means not charging more than you can pay off in full for each billing cycle.
Your 30s are also a good decade to get familiar with credit-related terminology. Think what it means to have credit available, credit utilization, credit reports and credit scores.
“In your 30s, you’ll want to make it a habit to regularly check your credit reports and scores and understand how to keep them in good shape for potential lenders,” Maliga said. “Keep in mind the single biggest factor that affects your credit score is payment history, followed by credit utilization — the amount of your available credit in use at any given time.”
Maliga recommends making, and sticking to, a goal of keeping credit utilization below 30% for lenders. If you don’t know how to read a credit report, meet with a financial advisor or professional who can offer assistance. Once you understand how to check a credit report, Maliga said you can better understand how to report any errors or inaccuracies to the three major credit bureaus and further advocate for yourself if you find mistakes.
Paying Off Debt
If you have debt in your 30s — and many people do carry debt ranging from student loans to mortgages in this age bracket — you’ll need to understand how you plan to pay it off.
Determine how much debt you have, the suitable debt repayment method you will use to pay it off and whether there are options to refinance or consolidate your debt. Maliga recommends reaching out to nonprofit student loan counseling and/or credit counseling services if you need help understanding your current financial situation and figuring out the best options to get debt under control and create a path forward.
As you ramp up in your career during this decade, one money skill that cannot be overlooked is the art of negotiation.
“From negotiating employment offers and salary increases, to requesting better rates from credit card companies and service providers, being a skilled negotiator will benefit your bank account and your long-term financial goals,” Maliga said.
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