Financial Advice For Yours 30s: Debt, Roth 401(k)s, & Budgets

If 60 is the new 40, where does that leave you, smack dab in the middle of your 30s? Confused is probably the answer, and no long-winded generational study or tongue-in-cheek listicle is going to help you find your answers. It’s too bad, since your 30s are already an overwhelming decade, especially when it comes to your finances.

Gone are the days that it’s acceptable to party every night and spend every last dollar on your trip to Ibiza, but neither are you ready to settle down completely and retire to a small hobby farm in the middle of nowhere. Regardless of what popular culture is saying about old being young again, your 30s are the in-between years when you’re just finding a career, starting a family, and asking questions about your future. And we’re not even going to touch your growing existential dread with a 10 foot pole.

Not all debt is bad

Most people’s knee jerk reaction to the idea of debt — regardless of their age — is that it presupposes bad finances. This is utterly untrue. Your 30s can be expensive as you enter into the housing market with lingering student debt and job dissatisfaction, and you’ll need help reaching your goals.

Good debt will help you invest in your future with the potential to improve your net worth — things like a mortgage, line of credit, or auto loan on a car you need to get to work. Even strategically used payday loans can work to your advantage. The benefits of an online payday loan include quick and convenient access to cash for a variety of financial profiles — not just those with perfect credit scores. Just like mortgages, lines of credit, and auto loans, these financial products must fit with your current financial capabilities. Its short terms come up quick, so be sure you read its full rates and conditions before you apply.

Invest in a Roth 401(k)

If you don’t already contribute towards one, you’ve at least heard of a traditional 401(k) in your lifetime. If not, it’s time to consider your choice of retirement savings plan. A traditional 401(k) is sponsored by your employer, and it allows you to take a percentage of each paycheck and put it into a special savings account. Though they aren’t legally obliged to add to your 401(k), many employers will match your contributions up to a specific percentage.

You don’t have to pay federal or state taxes on any contributions you make to a traditional 401(k) until you withdraw from the account. This is how it differs from Roth 401(ks), which allows you to make contributions after tax. Any contribution you place into your Roth 401(k) has already been subject to federal and state tax, so when you withdraw it you don’t have to pay income tax.

You’ll also avoid Required Minimum Distributions (RMD) that apply to traditional 401(k)s, which regulates how much you can withdraw when you reach the age of 70 and a half. Switching from one kind to another is worth thinking about, especially if you expect your tax rates to be higher when you retire. Traditional or Roth, what’s more important is that you start some kind of retirement plan.

Budgets

Without a budget, regular contributions to your retirement plan or responsible acquisition of debt will be just a pipe dream. A well-crafted and maintained budget is the most important tool within your financial toolkit. It’s more than just an Excel spreadsheet, list taped to your fridge, or an app on your phone. A budget lets you take stock of every dollar you make and spend in a week, month, or year. It lets you know, when all is said and done, how much cash you’ll have left over.

But a budget is only as good as its maker, so don’t guess at what you spend in any given week. Take the time to go through past bank statements to see the exact number you spend on anything, including but not limited to household wares, transportation, groceries, and takeout.

Why this microscopic view at your finances is important is because you’ll be able to catch bad spending habits that have the potential to jeopardize your 40s, 50s, and beyond. A thorough understanding of your cash comings and goings can highlight any area where you may be hemorrhaging money unnecessarily, so you can start to look for solutions.

Cutting out that daily coffee habit is an obvious money saver, but we often overlook infrequent ATM charges. They can add up just like your caffeine addiction. Use your budget to find these drains on your money and eliminate them from your habits. Then use the leftover cash to invest in your retirement plan.

Though this advice is relatively simple, it’s often disregarded by people in their 30s. Gain an advantage on your generation by taking heed of these tips, remembering that small dollar loans can substitute for savings when unexpected expenses come your way. It may not provide an answer to your percolating existential crisis, but it will help you stay on track in your 30s and beyond.

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