30 Money Moves for 30 Somethings | Legacy BlueStar | Sanlam Financial Planners Bellville, Cape Town

Financial Planning

30 Money moves for 30-somethings

Life doesn’t always go to plan, but by their 30s most people will be thinking about setting goals for their future. Whatever yours are, you can take steps to secure your financial future today.

Here are some money moves to make in your 30s

1. Create a realistic spending plan, review it and stick to it. Use your bank statement as a guide to your monthly spending and create a table of income and expenses. Don’t forget about the little things that add up. Look honestly at your spending, divide it into essential and non-essential items, and find out whether your expenditure exceeds your income.

2. Know where you’re going. Plot the milestones you want to reach in the short, medium and long term. Only once you’ve identified your goals and dreams can you start thinking about the financial implications and steps you need to take to make things happen.

3. Live on your own terms, but according to your means. Unless the Joneses are going to pay your debts, there’s no good reason to keep up with them. Dream big and be ambitious, but stay within your means and avoid unnecessary debt.

4. Use any raise or bonus wisely. When you have more money coming in it’s tempting to allow lifestyle expenses to increase. While it’s fine to enjoy a well-deserved treat, do hold back a portion for when you may need extra cash.

5. Be careful how you incur debt. Differentiate between good and bad debt. With a home loan, for example, you’re likely to benefit from capital appreciation over time – and student debt may be offset by the lifelong earning potential a qualification can bring. Exorbitant debt on depreciating assets and luxury items, however, is harder to justify.

6. Pay back debt in a smarter way. If your budget only allows you to pay a small amount towards your debts, be clever about splitting the amount. Make a list of all your debts, from the highest interest rate to the lowest. It probably makes sense to pay down debts with the highest interest rates first, and perhaps the smallest ones, which are easier to pay.

7. Pay cash for expensive items rather than using credit. If there’s no good reason to make a big-ticket purchase immediately, why not save for it over time instead of buying it on credit? This also lets you shop around some more. Once you’ve saved enough, you may actually find you no longer want or need the item.

8. Automate your debit orders. This payment method is ideal for recurring expenses. Schedule the payments as close to pay day as possible so once all of these amounts come off, you’ll know how much you have for the rest of the month. Then try to stay within budget without resorting to your credit card.

9. Differentiate between needs and wants. When you have the urge to buy something, think about how it’ll improve your life and whether you really need it. Is it something you need to own, or can you borrow it? Do you need the top-of-the-range version? Before you get to the checkout, think again about your purchase – in the case of an appliance or gadget, for example, will you honestly end up using it regularly?

10. Don’t be afraid to negotiate. Service providers or debt collectors may offer you better rates if you speak to them. Some companies allow you to renegotiate your interest rate, or to motivate for reduced repayment amounts. At least be prepared to shop around to find the best value.

More things to consider

11. Pack work lunches and eat at home rather than out. This requires some planning, but it’s a great way to cut down on daily expenses and you’ll probably eat more healthily.

12. Re-evaluate your services and contracts. Paying high fees on your bank account for services you don’t need, not using your gym contract, or have a satellite TV package where the programmes you actually watch are available on a lower priced option? You could save quite a bit by downgrading or cancelling where necessary.

13. Review values on your short-term insurance. When you first took out insurance on your vehicle it was valued at a certain amount. This will have dropped over time so it may be worth it to ask your short-term insurer about the current value of your vehicle and request that your premiums are amended accordingly.

14. Put extra bursts of cash into your home loan. Home loans usually have a lower interest rate than shorter-term debts, but once your other priorities are sorted, use a home loan calculator to check if it would be worth adding an extra couple of hundred to your monthly bond repayment. Especially if the outstanding term is long, this can significantly reduce both the repayment period and the interest payable over the term.

15. Be tax-savvy. Always file your returns on time to avoid late penalties and understand what deductions you can claim for. Also remember that you’re able to enjoy some tax breaks when investing in a tax-free investment account, and in retirement annuities up to a specified amount.

16. Change your mindset about saving. It’s tempting to think of saving for the future as secondary to living comfortably now and a nice-to-have for those with extra money. But if you’re not saving enough now, later in life you’ll likely be furious with your 30-year-old self for not thinking ahead.

17. Consider your future self as one of your key stakeholders. Spare a thought for yourself at age 60, 70 or 80. Do you really want to be struggling to make ends meet? Give some of today’s earnings to your current self and share some with your older self by saving into a vehicle you can tap into when you need it as a retiree.

18. A small amount is better than nothing at all. Sometimes people don’t save for their future because they’re waiting until they have better cash flow, less expenses or because they think they can ‘catch up’. However, it’s probably a better idea to invest small amounts from as early as possible rather than to delay saving.

19. Build up an emergency fund. If you haven’t started doing so already, put cash into a savings account separate from your longer-term savings. Essentially, you’re building a nest egg for unexpected emergencies.

20. Be wary of being too conservative. Your personal circumstances will determine how much risk you can afford to take in your investments, but generally, in your 30s you should have enough time to recover from short-term fluctuations if you invest in higher-risk funds. This could potentially be more beneficial than investing in lower-risk funds that offer lower returns.

last few tips

Safeguard your future

21. Preserve your retirement savings. Chances are that in your 30s you may be considering a career move from one employer to another. Unless there’s a compelling reason for you to cash out your retirement savings with that employer, preserve your savings in a suitable vehicle, possibly a preservation fund.

22. Your retirement savings aren’t a fund for your child’s tertiary education. It’s noble to want to give your child the best you can afford, but not at the expense of your retirement – especially if you believe they’ll fund your lifestyle in retirement, because this isn’t guaranteed.

23. Don’t rely on an inheritance you expect to receive. Sometimes people assume they don’t need to save since they’ll be receiving an inheritance when a parent dies. Again, this isn’t guaranteed and is a dangerous assumption. Even if you do inherit, factors such as death taxes, creditors and legal costs can significantly diminish the size of the inheritance.

24. Take out the right cover. Consider the effect on you or your children if you lost your income due to disability or illness, or if you died. Are you comfortable that you’ve made adequate provision? If not, it may be worth prioritising this today by putting the right policies and plans in place.

25. Make provision for maternity leave. In most cases, you won’t get a full income from your employer or the UIF during maternity leave. Consider whether you need to provide for the shortfall in your income during this time, and what the financial implications would be if there were complications that kept you away from work for longer than you envisioned.

26. Monetise your passion. Learn a new skill that can take you to the next level at work or give you an opportunity to supplement your income, if your job permits this. If it’s something you enjoy that has good money-making potential, you may be able to continue earning an income in your retirement years.

27. Draw up a will. If anything were to happen to you, what would happen to your assets – money, property and perhaps your business? Draw up a valid, professionally drafted will so you have a better chance of ensuring your estate can be divided according to your wishes.

28. Empower children to be financially responsible. Involve them in your household budgeting as soon as they can understand what it’s about. Start with simple, basic things for smaller children.

29. Don’t give up. Keep in mind that you’re not the only one struggling to balance your budget. Keep going, no matter what or how many times you fail to stick to your plan. Remember, it’s not how much you have. It’s how you use it.

30. Talk to a financial planner. Your expertise might not be in saving and finances and thinking about them may make you feel stressed. The solution is to visit a certified financial planner so you can work together on the best plan to manage your finances and, as a result, improve your chance of enjoying a better financial future.

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