As a 30-something, you’ve probably already established a career and have a retirement plan in place. While this is admirable and expected, it’s also likely you have plenty of financial obligations and goals, such as paying down debt and saving to buy your first home. All of these responsibilities can get in the way of acquiring true wealth, but if early retirement sounds nice, your 30s are the ideal years in which to make it a reality.
Curious as to how to go about building wealth at this point in your life? The tips below will help you begin building wealth in your 30s, even if you’re starting from scratch.
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Start an Emergency Fund
Not having a cushion of cash to fall back on can be a recipe for financial disaster. To be able to build wealth, you need to have at least three to six months’ worth of savings to cover all your daily expenses in case of a financial setback. To help you figure out how much you can comfortably afford to put away, use a tax calculator to determine your expected tax obligation for the coming tax season. Factor this into your budget, and save up every extra cent you can.
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Increase Your 401k
If your employer offers a 401k, take advantage of it by increasing your voluntary contribution. This is especially helpful if your employer matches your input. Their contribution is free money, so aim to increase your 401k contributions at least once a year to reap the highest savings possible.
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Invest in Other Retirement Plans
If you don’t have a 401k or you’re already maxed out on your contributions, other retirement plans exist that will help you build wealth in your 30s. An IRA (Individual Retirement Account) allows you to contribute a portion of your income each year. There are generally tax write-offs available for both 401k and IRA plans.
You may also want to consider opening a taxable investment account to stow money away for retirement. While there are no tax benefits for these accounts, you’re less restricted in terms of the amount you can contribute and withdraw yearly, allowing you to grow your wealth at your own pace.
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Open an HSA
Opening an HSA (Health Savings Account) is a great way to begin saving in your 30s. The money you contribute is pre-tax, and you don’t pay taxes on the money you withdraw as long as it’s being used for a qualifying medical expense like prescriptions, doctor or hospital bills, and eyeglasses.
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Assess Your Risk Level
Every type of investment carries some level of risk. To build wealth, you must figure out how comfortable you are with taking risks (your risk tolerance) and how much risk you need to take to reach your goals (your risk capacity).
For example, your 401k carries minimal risk. Your money is invested behind the scenes where its value fluctuates without you even knowing it. As you decide what type of investment you want to make and how much you’re willing to risk, keep in mind that the higher risk an investment poses, the higher the returns are likely to be. Growing wealth can be a risky business, but only you can determine how much you’re willing to take.
Your 30s are an ideal time to get started with wealth-building as you’re old enough to understand your goals but still young enough to rectify any poor choices you might make along the way. Take these tips to heart, and you’ll be on your way to earlier retirement.
Photo: Sharon McCutcheon/Unsplash
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