What should I do with my money in my 30's?
1: Get Rid of Bad Debt:
This step will be very relevant to anyone looking to get a mortgage, as bad debt makes it much harder (if not impossible) to acquire one. The highest rate of interest you will pay is on short term debt and credit cards which is a major drain on cash flow. Interest rates on short term loans including car loans can really eat away at your income and with some credit cards carrying a rate of 20% these unpaid bills can very quickly add up. The first step in any financial plan should be to work on clearing this debt and as your cashflow improves you will find it easier to save.
2: Build up An Emergency Fund:
This will often be known as a rainy-day fund and is exactly what it says on the tin. It’s a fund that you have in case of emergency because unfortunately emergencies happen and no matter how good you’re at budgeting you can’t plan for everything. This money should be kept in an easy access savings account. These accounts offer very little interest, but you will earn something small and it’s always good to have peace of mind.
Generally, it’s recommended to have 3 to 6 months’ salary stored away but this will vary from person to person.
3: A pension
If you do not have one yet it’s a good idea to start looking into one. You have probably heard it a million times at this stage that having a pension is important when you retire. This has become more critical when we consider the government’s recent comments about the state pension being unsustainable.
There are a few benefits to starting immediately:
- Compound interest: The longer your money is invested, the longer the period of time it’s earning a return and hence growing the value of your pension.
- One of the last Tax relief Schemes Available: You can get up to 40% income tax relief (depending on your tax bracket) on your pension contributions and all investment growth is tax free up until you reach retirement age.
It’s probably better to start saving now rather than looking back in future years thinking - if only.
4: Insurance
As we get older insurance becomes more important especially in the unfortunate instance something bad happens to us. Life insurance, income protection and health insurance are some of the different covers that are available to you. Not all protections need to cost a fortune either, life assurance can cost as little as €10 per week.
5: Kids
If you have children or are planning for children it’s a good idea to plan for their future e.g. college. College for many is expensive so it can be smart to put away something every month into a long-term savings account. The growth may be relatively low, but it does provide some help in the future. It helps with these costs and if your child decides not to go to college it can be a fund to help them get started as an independent adult.