10 steps to financial security by age 30

Being financially secure before you hit 30 may seem out of reach for many people in their 20s, but it is possible. Working towards financial security doesn’t have to be an exercise in self-deprivation, even though many people think it is. Achieving this goal even has immediate benefits since financial insecurity can be a serious source of stress.

Here are 10 steps to take to achieve financial security before you turn 30.

Key points to remember

  • Knowing how much you spend can help you control your spending.
  • Live within your means, don’t use credit to fund a lifestyle, and set achievable short-term financial goals.
  • Gain financial knowledge and save what you can for your retirement.
  • Take calculated risks, like moving to a city with more job opportunities or taking on a new job that pays less but has more growth potential.
  • Invest in yourself by continually improving your skills and knowledge.
  • Find a balance – working towards financial security doesn’t mean you have to deprive yourself.

1. Track your spending

Know how much you spend and what controls your spending. A free budgeting app like Mint can help you do this.

You might find that ordering food several times a week costs upwards of $300 a month, or recurring charges for streaming services and subscriptions you never use are a waste of your hard-earned cash. If you can afford to spend hundreds of dollars a month to order, great. If not, you’ve just discovered an easy way to save money besides canceling streaming services you forgot about.

2. Live within your means

Keep your standard of living below what your income can support. As you advance in your career and gain more experience, your salary should increase. But rather than using that excess income to buy new toys and live a more luxurious lifestyle, the best thing to do is to spend the money on reducing debt or increasing savings. If the cost of your lifestyle is lagging behind your income growth, you will still have excess cash that can be allocated to financial goals or an unforeseen financial emergency.

3. Don’t borrow to finance a lifestyle

Borrowed money should be used when your gain exceeds your borrowing costs. This may mean investing in yourself – for your education, to start a business or to buy a house. In these cases, borrowing can provide the leverage you need to reach your financial goals faster.

On the other hand, using credit for a lifestyle you can’t afford is a losing proposition when it comes to building wealth. And the additional interest charges of borrowing further increase the cost of living.

4. Set short-term goals

Life is full of uncertainties, such as an economic crisis or losing a job, and a lot can change between when you’re in your twenties and, say, 40 years later when you can take your retirement. As such, the prospect of planning far into the future can seem daunting.

Rather than setting long-term goals, set yourself a series of small, short-term goals that are both measurable and specific, such as paying off credit card debt in a year or contributing to a retirement plan. with a fixed contribution each month. If you set goals, you’re more likely to achieve them than if you just said you wanted to pay off your debts, but didn’t set a deadline. Even writing down some goals can help you achieve them.

As you reach short-term goals, set new ones. Consistently setting and achieving short-term goals will help you achieve longer-term goals, like having a solid retirement nest egg.

5. Become financially competent

Earning money is one thing, but saving it and growing it is another. Money management and investing are lifelong endeavors. Taking the time and effort to learn about personal finance and investing will pay off for you throughout your life. Making good financial and investment decisions is important to achieving your financial goals.

6. Save what you can for retirement

When you’re in your 20s, retirement seems like a lifetime away, and planning for it may be the last thing on your mind. If you can take a few steps now to start saving, compounding will work in your favor. Even a small amount saved at the beginning of your life can make a big difference in your future. Building a retirement nest egg gets harder the longer you wait.

Try setting up automatic monthly contributions to a retirement plan, like an employer-sponsored 401(k) if you have access to it, or an IRA if you don’t. You can increase your contributions when your income increases or when you have reached more of your short-term goals.

If you implement the ideal of paying yourself first, you won’t have to worry about how much you’re contributing. The most important thing is to develop the habit of saving.

7. Don’t leave money on the table

If you work for a company that offers a 401(k), be sure to contribute at least up to the maximum of what your employer will match, or you’re leaving money on the table. Also, you can deduct your contributions in the year you make them, which reduces your taxable income for the year.

If you don’t work for a company that offers a 401(k), contributing to a traditional IRA will also result in tax savings because you can deduct the contributions as well.

8. Take calculated risks

Taking calculated risks when you’re young can be a prudent long-term decision. You might make mistakes along the way, but when you’re young you have more time to recover from them.

Here are examples of calculated risks:

  • Move to a new city with more job opportunities
  • Back to school for further training
  • Take a new job at another company for lower pay but higher growth potential
  • Invest in high-risk/high-reward stocks

As people age, some may take on more responsibilities, such as paying off a mortgage or saving for a child’s education. It’s easier to take risks when you have fewer responsibilities.

9. Invest in yourself

Consider yourself a financial asset. Investing in yourself will pay off in the future. Your skills, knowledge and experience are your main assets. Increase your value by continuously improving your skills and knowledge and making wise career choices.

While that investment often starts with college or trade school, updating skills and learning new, in-demand skills can help you become part of the more attractive and better-paying workforce. . Investing in yourself should continue throughout your life.

10. Find the right balance

It is also important to find the right balance between your life today and that of tomorrow. Financially, we cannot live as if today is our last day. We have to decide between what we spend today and what we spend in the future. For example, set a short-term goal to save for a trip to a destination you’ve always wanted to see instead of using a credit card to fund it. Finding the right balance is an important step towards financial security.

Sarah J. Greer