What You Need to Know About Money Between the Ages of 30 and 40
Your 20 years are behind you, and now you have a spouse, children and maybe even a house to show. Ideally, you save a little for retirement , you have a debt settlement plan that works for you, and you have built up your savings over the years to meet your financial goals . You are comfortable, or at least you are achieving it, but you still want to make sure that you are not missing out on anything from your financial life. There is still much to be learned.
This is the third article in the latest TwoCents series, What You Need to Know About Money at Any Age . You can also read about what you should know before your 20s and how to manage your money in your 20s and 30s . Stay tuned for more tips for people 50, 60 and older.
Here’s what you need to know about money, when you leave, you are entering the second half of your career.
Keep investing in yourself
According to statistics, these are the years of your peak earnings , but this does not mean that you are guaranteed to earn more and more. You need to continue to invest in yourself and your skills to remain attractive in the job market.
If you are in your 30s and 40s, your career may take another 25-30 years. Consider what you want to do during this time and what skills you will need to do this.
Think: are you surrounded by people smarter than you, from whom you can learn? Could you use your skills in a variety of jobs and professions? Are you out of your comfort zone? Are you involved in meaningful work, projects, volunteering, etc.? Are you still energized at work? If you answered “no” to many of these questions, you will have ample time to fix it and achieve your long-term career goals.
There are many ways to get more skills, if that’s what you are missing, some of them are quite cheap. Your local community colleges and universities probably offer continuing education courses, and there are a number of workshops you can find online at places like SkillShare.
Don’t forget about the network
For many workers, new jobs and opportunities come from those you know rather than what the cover letter says, especially in the middle or end of your career. So maintain a network of old colleagues and work acquaintances. You never know who can help you in the future.
And, as we discussed in the previous part of this series, this can be especially true for women if they leave their jobs to take care of children. Monica Dwyer, a certified financial planner and welfare advisor, says a lot has changed in the 10 years she has stayed at home with her children and would like to stay in closer contact with people in her industry.
“When I returned to work, I could not return to the director position that I left, so I had to start all over again,” says Dwyer. “I was naive enough to think I could just go back to what I had done successfully before, but no one wanted to take me to that level because I no longer had a track record.”
“I don’t regret spending this time with my children in their most vulnerable years,” she adds, “but I really regret not keeping my feet in the water with my former colleagues.”
Increase your investment
You are making more money and now is the time to try to top up your retirement accounts and focus on commissions, not income . These are critical years on the road to retirement (or, more simply, financial freedom ) – you can still catch up if you didn’t get into investing habits early in your career.
Consider being a little more optimistic than usual, especially at age 30 – if you retire around age 65, you still have 20-30 years to invest. This is a fairly long time horizon to bounce off any dips (but, as always, invest according to your risk tolerance ). People who fear stocks due to the financial crisis or the dot-com downturn in the early 2000s “may be missing out on the potentially higher returns that stocks will bring over the next two to three decades,” says Kevin Ta, senior wealth strategist. at PNC Wealth Management . “These more conservative investments in money market, CDs, Treasuries and bonds may not keep up with rising commodity prices over time.”
Robo consultants such as Wealthfront and Betterment offer low cost asset allocation advice, as does Vanguard’s personal advisor service . Above all, make sure you invest long term in a wide variety of low cost options. (And keep an eye on old retirement accounts .) Don’t forget about dividends .
If you are juggling demands, you usually think that you can borrow for studies and mortgages, but not for the best retirement, so you should prioritize. This is not wrong, but remember that once you turn 50, you can start making additional contributions to your retirement accounts (that’s an extra $ 6,000 for your 401 (k) this year and another $ 1,000 for your IRA ). So, transferring some of the money to 529 or a down payment can be a smart move if you can contribute to all of them. Meeting with a financial planner can help you understand what makes sense for you and your family.
LearnVest offers targeted investing, which means that “every investment has a goal or objective associated with it, allowing you to invest in each account according to your time horizon and your risk tolerance for each goal.”
This is also a good time to open Roth, if you haven’t already done so and have not exceeded your income limits (of course, there is always the possibility of a backdoor ). Since you are contributing to this investment vehicle after taxes, it will help minimize your tax headache upon retirement. You may also want to consider opening a taxable investment account that you can use to offset costs in your first few years of retirement as your deferred taxes (401 (k) s and IRAs) continue to rise.
Pay off your debt
You don’t want to retire with debt hanging over your head, although more and more people are doing it. Experts say you should be close to paying off your student loans at the end of your 30s, but if that isn’t the case, don’t panic. Review your repayment plan and make changes if necessary.
At the very least, you don’t want to increase your debt when you approach 50, even if that means less investment in your investment. Paying off your debt should be your top priority.
Access your healthcare costs
Remember that you are your most valuable asset. Take care of yourself and pay attention to your health. You are no longer a child: take advantage of “free” prevention services every year. As I wrote here , simply by following your doctor’s orders and taking prescriptions as described, you can save tons of money.
If you have a health savings account at work, use it to save money in a tax-efficient way. HSA contributions are deducted from your taxable income when made; investment income is not taxed; and the money you withdraw to pay for qualified medical expenses is tax deductible. This is a win-win. But beware, they are combined with high deductible health insurance plans that can be prohibitively expensive. You may find that the lower out of pocket spending plan and flexible spending account is right for you.
Otherwise, check the terms of your insurance:
- Deductible : How much you will have to pay out of pocket before your insurance expires (this does not include preventive services that you are entitled to without a copayment or any other fee). The average deductible HDHP was 4 133 dollars a year for family coverage and 2166 dollars for a one-time insurance coverage in 2018, while the PPO deductible averaged 2198 dollars a year for family coverage and 1012 dollars for a one-time insurance coverage.
- Copay / Co-insurance : A fraction of the cost of a visit or prescription even after the deductible is covered . The copay is a fixed amount (for example, $ 10 per visit), and co-insurance is a percentage of the services you receive.
- Maximum Cash : How much you have to pay for on-net services before insurance takes over the rest.
Keep track of suppliers and properties inside and outside the network . In some cases, you may not be able to help if you are seen by an offline doctor, especially in the emergency room (oh, the joy of the American health care system!). But for routine procedures, surgeries, etc. Make sure your doctor and hospital or clinic are part of your insurance network, NerdWallet suggests :
- Go to your insurance company’s doctor finder or directory, enter your plan information, and find your doctor. This should tell you if the doctor you want to see is not only covered by your insurance, but also in your plan’s network.
- Check your findings with your insurance company over the phone, making sure the doctor’s name and location matches what your insurance company has. In some cases, providers work in multiple locations that are not part of the same network, or two doctors have similar names.
- When making an appointment, confirm that the office is in your plan and not just “accepting” your coverage. Be sure to ask them specifically, “Is every provider I see at your institution participating in this insurance plan?”
If you don’t have employer-sponsored insurance and are shopping in the individual marketplace, “look at the deductibles and co-payments, the services offered, any restrictions on the doctors you can see, and what additional benefits the plans offer,” says Lisa Hayes, Sr. Wealth Management Strategist PNC Wealth Management . “Depending on your income, you may be eligible for a subsidy from the state plan, but only if you choose” the silver tier plan .
And don’t forget to plan your visits carefully .
Teach Children to Appreciate the Dollar
As you already know, to live is to make sacrifices. Some things will take precedence over others, although you may not want to explain to your children why you are making the decisions you make. But it can be a great way to teach them how to understand money and be responsible for their finances. (Plus, they’ll hopefully begin to understand why you can’t buy them every toy or fancy outfit they want at any given time.)
Talk to your parents about their finances
This is one of two potentially awkward financial tasks that you will need to tackle before it’s too late. Talk to your parents about their finances and see where they are in terms of retirement, health care costs, housing, and more.
As Kathleen Burns Kingsbury, an expert in wealth psychology, told me in this article , to do this as painlessly as possible, you should try to eliminate emotions from the conversation by letting them feel in control.
“You want to make sure that you allow them to feel in control, to maintain some dignity,” she says. “Sometimes you ask your parents and they are really relieved and you talk.”
As I wrote earlier, Kingsbury suggests the following:
- First, feel your feelings . “We can have all sorts of emotions about our parents getting older, so you can talk to a friend or counselor and, having done that first, by the time you approach your parent, you’ll think it over.”
- Then lead with loving intent . “Let’s say you’re upset and scared, you walk in and you’re not ready – no one will be receptive,” she says. “So plan … tell them that you are starting to worry and would like to help them.”
- Finally, give them time and time to make a decision . “You may have been thinking about this for three months, but this may be new to our parents,” she says. “Sometimes parents just need a little time to think about it.”
Settle one’s affairs
Gloomy? Certainly. But if something happens to you, your family will be grateful that you have a plan and you can make sure your assets are distributed the way you want them to be. It doesn’t have to be an expensive process; you can do it online from a place like LegalZoom for under $ 100.
In Money Magazine, you’ll want to address these issues specifically:
- Who do you want to inherit your assets to?
- Who do you want to appoint as guardians for your children in the event of the death of you and their other parent?
- Whom do you want to entrust to the fulfillment of your will?
- Who do you want to handle your financial affairs if you ever find yourself incapacitated? Who do you want medical decisions to be made for you if you cannot make them yourself?
At the very least, you and your spouse should be on the same page about your finances. You need to know how much the other is earning, how bills are paid, what investment accounts are, etc. Open communication is key, and it can make it a little easier to carry over any potential disaster.
And explore your life insurance options (most likely term life insurance, not all), especially if you have children. In Get a Financial Life , personal finance expert Beth Kobliner suggests shopping around at “one-to-one, direct-to-consumer firms like TIAA and Ameritas,” as well as comparison sites like Term4Sale.com.
“One rough rule of thumb is that you should buy a policy that will pay seven to ten times your annual pre-tax income if you die, but many people need more than that,” writes Kobliner.
Now that you’ve had difficult conversations and spent a lot of time on your goals, objectives, tasks, it’s time to just have some fun. Not every dollar needs to be maximized or spent on a rainy day. Go on vacation with your family, leave work early to go to your daughter’s soccer game, and occasionally splash out on a few good meals out of the house.
Avoiding “necessary” things like a big house and a nice car can help here. If you don’t want a lavish wedding or a home in the suburbs, go for it. Spend money on things that matter to you and your spouse.
It might even mean a little retirement (or, you know, some vacation) now, instead of waiting until you turn 60 or 70. You have worked and you deserve to enjoy it. ( Check out this subreddit for inspiration.)
And that will take us to the next installation of the book What You Need to Know About Money at Any Age . See you soon.