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Five Money Decisions To Make In Your 30s

28/06/2017 14:07 BST | Updated 28/06/2017 14:07 BST

The majority of society see the 30s as the decade in which adults become more stable, specifically in their financial standing. It makes intuitive sense for some people to prefer structure or security at this point. They need to hold on to their family and career choices, an act that requires maturity in money matters.

If you are in that kind of situation, you may be looking for ways to cement a stronger relationship with money. Here are six major life areas to focus on as you do so:

Owning property

Owning a piece of land meant a lot to our ancestors. These days, homeownership is at a record low among millennials, the generation that is poised to be the largest market in the coming decades. Delay in marriage and children, tighter credit standards, and lifestyle changes count as factors causing the trend.

While renting and living with parents seem to be the more attractive alternatives, buying a house has its own benefits. The costs of homeownership are predictable and more stable than those of renting. A fixed-rate mortgage, for instance, requires you to shell out for the down payment, monthly payments, and closing costs/fees. You can make plans and projections accordingly, especially when you are already aiming to settle down.

Strengthening your safety net

Now that you are in your 30s, you are probably earning more. At the same time, your scope of responsibilities has also grown. Thinking of marriage, kids, or a business venture? Make sure you have a safety net to fall on when things do not go as expected.

A good rule of thumb is to set aside twice the amount you're planning to splurge on something fancy like a wedding or child care. If you quit your job to freelance or start a business, you should have prepared at least thrice your expected revenue in case client payments get stalled.

Saving enough for retirement

There is a reason people underestimate their need for a retirement fund. Dr. Hersh Shefrin, a pioneer in the study of behavioural economics and a professor at Santa Clara University's Leavey School of Business, is quick to point out the bias. According to him, people tend to put much weight on the present and near future over the distant future. A second bias also comes into play: people tend to downplay the extent to which bad things will happen.

Be aware of your biases and decide on fattening your retirement fund. Still, there is no need to exert too much pressure on yourself. Just start small. You can also complement that fund with an insurance plan. Most importantly, your financial goals and plans should be in alignment with each other.

Starting an investment portfolio

So you've established an emergency fund. Now it's time to build wealth outside your house and retirement accounts. Maximise the potential of a greater earning power by creating an investment portfolio. You can spread the risk by launching a business and investing in the stock market. However, you need to have a good foundation for doing this, such as a long-term goal or strategy. Experts advise against stock investing if you are in it for, say, just five years.

Clearing debts

You probably have paid off most of your student loans by now. Ideally, you should be debt-free well into your 30s. In reality, though, a thirty-something adult will be dealing with more than one type of debt. It's a series of paying down credit card debts, mortgages, car loans, and such at this stage.

To face this kind of situation head-on, you need to return to the biases pointed out by Dr. Shefrin. Do not borrow more than what you are prepared to pay. Also, pros advise paying down smaller balances first. They say this will give you a psychological boost, which in turn will cause you to clear larger balances immediately.

Final words

There are risks inherent in financial decision making no matter your age. In your 30s, however, those listed above will be more satisfying to achieve as you work towards greater stability. Use this decade to cement a stronger relationship with money. Update your financial knowledge. Keep slaying your financial goals. You're in a good position to resolve the issues that arose from your 20s and prepare for a better life in your 40s and beyond.

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