How to Manage Money in Your 30s

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By Kimberly Palmer

Your 30s can be a pretty significant decade. You might be transitioning from the more carefree days of a post-collegiate lifestyle and hitting major life milestones, such as buying a home, getting married or having kids. Or you might be planning major life adventures, climbing up the career ladder or all of the above. Whatever your path, you likely face some significant money decisions, and the choices you make can end up impacting your finances for years to come.

A report released from the Pew Research Center earlier this month shows that millennials, the oldest of whom are just entering their 30s now, face higher student debt and unemployment levels along with lower income and wealth levels compared to previous generations at the same age. At the same time, they are optimistic about their economic futures, with most (80 percent) saying they have enough money now or will one day to "lead the lives they want."

To increase the chances that such an optimistic outlook comes true, here are seven money moves that financial experts say you should consider in your third decade:

1. Save when you can. "If you've gotten your salary up to the point where student loan debt is not wreaking havoc in your life anymore, but before you have a lot of responsibilities, that's a great opportunity to super-charge your savings," says Jean Chatzky, financial editor of the Today Show and author of "Money Rules: The Simple Path to Lifelong Security." When parenting responsibilities and mortgage costs take off, for example, it can be hard to save more. "You want to take advantage of the opportunities you have to sock away some money so when the leaner years come around, you don't beat yourself up," she adds.

2. Create solid habits. It's also time to establish financial habits that will serve you well for the rest of your life. Kerry Hannon, personal finance expert and author of "Great Jobs for Everyone 50+," says in her 30s, she maxed out her retirement savings accounts and even set aside a portion of her extra freelance income for retirement. "Those funds have served me well over the years as mad money to help pay for vacations and more. I still save outside of retirement accounts religiously in my 50s, too. It's a habit I started back in my 30s," she says.

3. Plan out your goals and priorities. "Hopefully you're starting to become established in your career and can begin to contribute, if you're not already, to an employer-sponsored retirement plan, and begin to think about other savings goals, too, like a home purchase or college savings," says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial.

Trent Hamm, founder of the personal finance website The Simple Dollar and a U.S. News My Money blogger, says at age 35, he's now reflecting on his career goals for the next 30 years. "What would I like to be doing with my time and my life? I don't want the rest of my life to be a repetition of what I'm doing now and then an abrupt retirement. I have dreams and goals, and right now is the best time to get started on them," he says.

For many people, a financial adviser helps with that. Bart Astor, author of "AARP Roadmap for the Rest of Your Life," says your 30s is the ideal time to sit down with a financial adviser and talk, which is what he started doing in his mid-30s. He says he and his adviser met once a year to review savings and other financial goals, especially since he and his wife were meeting their goals. "When I hit 40, the plan showed that we should have about $188,000 in assets based on our salaries, and we had over $200,000, and boy, did that make us feel good," he says.

4. Talk about money with your partner. If you have a spouse or partner, then getting on track together and working out any disputes can prevent conflicts later. "People often comingle finances with their partner, and open communication is key. Make sure you talk about your finances and life goals with your partner, and align on how you will get there together," de Baca urges.

5. Get comfortable with negotiation. Nancy L. Anderson, 52, a certified financial planner in Park City, Utah, says while she did a lot of things right in her 30s, including investing 20 percent of her income, buying a home, investing in rental property and saving for her child's college education, she also wished she had negotiated her salary more assertively. "If I'd negotiated a higher salary each time I changed companies in my career, I'd be wealthier today," she says. Since most people change jobs about 11 times in their careers, negotiating those transitions can end up making you more than $600,000 richer over your career, she adds.

6. Be a good role model. For those 30-somethings who are already parents, Beth Kobliner, author of "Get a Financial Life" and member of the President's Advisory Council on Financial Capability for Young Americans, says it's important to model smart financial choices for the little eyes watching you. %VIRTUAL-article-sponsoredlinks%"You lose all credibility lecturing your little kids about not needing every new toy or tech gadget if you, behind closed doors, have loud arguments with your spouse about not being able to keep up with your credit card bills," she says. You don't have to be a money genius, she adds, but it's important to talk about money – making financial discussions as commonplace as soccer practice or Sunday dinner.

7. Shore up your cash reserves. While many experts emphasize long-term investing and retirement savings, Tim Maurer, director of personal finance for the BAM Alliance of independent advisers, says he wishes he had kept more money in pure cash savings to give himself a better buffer for unexpected needs and expenses. "Much, maybe too much, financial planning is focused exclusively on the long, long-term," he says, "and while it's true that real estate can be a great way to build wealth and one should start saving as early as possible for retirement, it's the unexpected changes in life that often derail 30-something households. Our financial plans should address the short-term, too."

Maurer points out that your 30s are often a time of "volcanic change" in your personal and professional life, and having a nicely padded bank account can help smooth over some of those transitions.

Kimberly Palmer is a senior editor for U.S. News Money. She is the author of the new book, "The Economy of You." You can follow her on Twitter @alphaconsumer, circle her on Google Plus or email her at kpalmer@usnews.com.


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How to Manage Money in Your 30s

Plenty of Americans live beyond their means but don percentt even realize it. A 2012 Country Financial survey found that more than one-half of respondents (52 percent) said their monthly spending exceeded their income at least a few months a year. Yet only 9 percent of respondents said their lifestyle was more than they could afford. Of the 52 percent who routinely overspend, 36 percent finance the shortfall by dipping into savings; 22 percent use credit cards.

Blowing your entire paycheck (and then some) each month isn percent an ingredient in the recipe for financial success. Neither is draining your savings or running up card balances. To rein in spending, start by tracking where the money goes every month. Try to zero in on nonessential areas where you can cut back. Then create a realistic budget that ensures you have enough to pay the bills as well as enough for contributions to such things as a retirement account and a rainy-day fund. Our household budget worksheet or an online budgeting site can help.

If you're like most folks, your savings habits could use some improvement. The personal savings rate in the U.S. is just 4.9 percent of disposable income, down from a high of 14.6 percent in 1975. Only about one-half of Americans (54 percent) say they have a savings plan in place to meet specific goals, according to a 2013 survey commissioned by America Saves, a group that advocates for better saving habits.

Saving needs to be a priority in order to build wealth. Begin with an emergency fund that can be tapped in the event of an illness, job loss or other unexpected calamity. A 2012 survey by the Financial Industry Regulatory Authority found that 56 percent of individuals say they have not set aside even three months' worth of income to handle financial emergencies. Once your emergency fund is well under way, you can divert small amounts toward other goals, such as buying a home or paying for college. These six strategies can help you save more, no matter your income.

Americans have $846.9 billion in credit card debt alone. That's $7,050 per household, according to NerdWallet.com, a Web site that analyzes financial products and data. If you're only making minimum monthly payments on $7,050, it'll take 28 years and cost you $10,663 in interest before you're debt-free, assuming a 15 percent interest rate. And that only holds true if you don't make any additional charges.

Some debts can lead to financial success -- a mortgage to purchase real estate, a credit line to start a business or a student loan to fund a college education -- but a high-interest credit card balance usually doesn't. Pay down credit cards with the steepest rates as quickly as possible. Putting $250 a month toward that same $7,050 debt will retire it in three years and save you about $9,000 in interest versus making minimum payments. See Escape the Debt Trap for more strategies to chip away at what you owe.

Late fees, banking fees, credit-card fees -- the amounts might seem insignificant when taken individually. After all, an overdue library book or Redbox DVD might only run you a dollar. But if you're regularly paying penalties and fees, these charges can quickly eat a hole in your budget. Consider this: The average bank overdraft fee is $32.20, according to Bankrate.com, and the average charge for going outside your ATM network is $4.13. Late-payment penalties for credit cards can climb as high as $35.

So how do you avoid pesky fees? Read the fine print so you understand fee rules, and stay organized so you avoid breaching those rules. Here are 33 common fees you can avoid -- or at least reduce -- with just a bit of effort. With the extra cash, you can pay down debt or boost your savings.

Would you ignore a hundred-dollar bill on the sidewalk? Of course not. You'd bend over and pick it up. So why are you passing up other opportunities to get free money? If your employer matches employee contributions to a 401(k) but you're not participating in the retirement plan, then you're passing up free money. If you let rewards points from loyalty programs or credit cards expire, then you're passing up free money. If you claim the standard deduction on your tax return when you qualify for itemized deductions that could lower your tax bill even more, then you're passing up free money.

Believe it or not, there might even be free money out there that you forgot about -- or never knew of in the first place. There are more than $41 billion worth of unclaimed assets ranging from old tax refunds and paychecks to forgotten stocks and certificates of deposit being held by state agencies, according to the National Association of Unclaimed Property Administrators. Do a search on MissingMoney.com to find out if there are unclaimed assets that belong to you.

It's easy to focus on the present -- the bills you have to pay, the things you want to buy -- and assume you'll have time in the future to start saving for retirement. But the longer you wait, the tougher it will be to amass a sufficiently large nest egg. For example, if you wait until you are 35 to start saving for retirement, you'll have to set aside $671 a month to reach $1 million by age 65 (assuming an 8 percent annual return). But if you start at age 25, you'll need to save just $286 a month to hit $1 million by the time you're 65.

Even if you're creeping closer to retirement, it's not too late to start putting away money. In fact, Uncle Sam makes it easier for procrastinators to catch up on retirement savings. If you're 50 or over, you can contribute up to $23,000 annually to a 401(k) (versus $17,500 for those younger than 50). The contribution limit for older savers to traditional and Roth IRAs is $6,500 a year (versus $5,500 for everyone else). Use our Retirement Savings Calculator to figure out how much you need to save.

Does this sound like your investing strategy? You hear about a stock that is soaring, and you want to get in on the action, so you impulsively buy. But soon after, the stock starts tanking. You can't bear the pain of watching your shares decline further in value, so you immediately sell at a loss. As a result, you're wasting money rather than building wealth.

Unfortunately, many investors buy high and sell low because they follow the herd blindly into the latest hot stock. You can resist the urge to go with the crowd if you adhere to smart investing techniques. One such technique is dollar-cost averaging, a simple system of investing at regular intervals no matter what the market is doing. While it doesn't guarantee success, it does eliminate the likelihood that you're always buying at the top -- plus, it takes the guesswork and emotion out of investing. See the 7 Deadly Sins of Investing to learn how to overcome common missteps.

New stuff is nice, but it's often not the best investment. Take cars. Estimates vary, but some experts say a new vehicle loses 30 percent of its value within the first two years -- including an immediate drop as soon as you drive off the dealer's lot. According to Kelley Blue Book, the average vehicle is worth 44 percent less after five years.

If you're not comfortable buying something that someone else has owned, get over your hang-up because you're missing a big money-saving opportunity. Many pre-owned items can cost up to 50 percent to 75 percent less than the price you'd pay if you purchased them new. From designer jeans to college textbooks, here are 11 things that you should consider buying used because you often can find them in good or almost-new condition at a fraction of the price.

An early retirement is a dream for many, but calling it quits if you're too young has several potential drawbacks. For starters, you could incur a 10 percent early-withdrawal penalty if you tap certain retirement accounts, including 401(k)s and IRAs, before age 59½. (There are exceptions.) You can claim Social Security as early as age 62, but your benefit will be reduced by as much as 30 percent from what it would be if you wait until your full retirement age, which falls between 66 and 67 depending on your year of birth.

Health care is another big issue. You must be 65 to qualify for Medicare. In the meantime, without access to an employer-sponsored plan, you might have to pay a lot more out of pocket for individual coverage until you're eligible for Medicare.

And speaking of health, the longer you live in retirement, the more likely you are to outlive your nest egg. Let's say you make it to the age of 90. A $1 million portfolio evenly split between stocks, bonds and cash has a 92 percent likelihood of lasting until you turn 90 if you retire at 65, according to Vanguard. But retire at age 55 and the likelihood drops to 66 percent. Use our Retirement Savings Calculator to determine when you can really afford to retire.

This might be the single biggest obstacle on your path to riches. If you're not investing in continuing education, training and personal development, you're limiting your ability to make more money in the future. "Your own earning power -- rooted in your education and job skills -- is the most valuable asset you'll ever own, and it can't be wiped out in a market crash," writes Kiplinger's Personal Finance Editor in Chief Knight Kiplinger in 8 Keys to Financial Security.

Consider taking nondegree courses online to boost your knowledge of your field or enrolling in a graduate program (see 5 Advanced Degrees Still Worth the Debt). If you don't have a college degree, see our picks for best college values or check out these four alternatives to a four-year college degree. Just keep in mind that some college majors (think finance, computer science or nursing) lead to more lucrative careers than others (sorry, arts and humanities lovers).

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