Whether you’re planning ahead for retirement or simply want to hit (or surpass) the $100,000 net worth target, your 30s are a great time to start seriously investing and building wealth. You’ll be making strides in your career, drawing a higher salary than you received in your 20s, and still young enough to retire a millionaire with just $15 a day. In this decade of your life, you could possibly be buying a house, getting married, and even starting a family. Good times are ahead, but if you want to make them last your lifetime, you need to start making these 5 financial moves now.
Start saving for your goals
Your 30s should be when you start clearly defining your goals and working towards them. Determine what you’re saving for, the amount needed, and the time horizon required. Your short-term goals could include saving for a house down-payment, a wedding, or a new car. Long-term goals might be a comfortable retirement, or money for your children’s education. With these goals in mind, you can work backwards to figure out how much to save and invest each month to achieve them.
It’s not always feasible to start saving for all your goals right away, so prioritise those that are most important to you and start from there. One trick to save consistently for your goals is to automate your savings. Decide on the amount you want to save and have it transferred automatically from your checking account to a separate savings account each time your paycheck comes in.
Time is on your side when you’re in your 30s. Market corrections are part and parcel of investing, but with 20 or more years before retirement, investors in their 30s don’t have to fear a downturn. There’s plenty of time to ride out market dips and wait for the inevitable market recovery.
In other words, don’t fear risk; use it to your advantage. Investments with higher risk tend to offer higher potential returns while investments with lower risk tend to provide lower returns. This means you can be more heavily invested in stocks, which while volatile, can offer higher returns than bonds. The worst thing to do would be to keep cash: The average annualised total return for the S&P 500 index over the past 90 years is 9.8%. It’s nearly impossible to build wealth just by holding cash and staying on the investing sidelines.
Having said that, you still need to ensure that your portfolio allocation matches the risk you’re willing and able to undertake. A portfolio that is not in sync with your risk tolerance may expose you to more losses than you are comfortable with, if you end up panic selling your investments when the market’s down. For a better understanding of your risk tolerance, take Syfe’s Risk Assessment. From there, you will be able to view the ideal asset allocation for your risk profile and financial goals.
Seek inexpensive diversification
Owning stock in a cool company like Beyond Meat or Spotify may give you bragging rights, but that doesn’t mean you should go all in. Investing in a single stock is inherently more risky than investing in a diversified basket of stocks. But buying a basket of individual stocks can be expensive after accounting for brokerage charges tied to each purchase or sale.
The trick is to use exchange-traded funds (ETFs). ETFs are low-cost funds that track an index like the S&P 500, and mirror the performance of the index. Because they hold the same proportion of securities as their index, buying just one ETF gives you instant exposure to a wide assortment of stocks.
For further diversification, multiple ETFs can be combined for better risk-adjusted returns. If all that sounds too hard to manage on your own, Syfe provides global ETF portfolios diversified across geographies, sectors, and asset classes for a small annual fee starting from 0.4% per annum.
Maximise your income
To become wealthy, you need to find ways to increase your income. This could be through asking for a raise or exploring better-paying career opportunities. Your 30s are also a great time to start creating multiple income streams to fast-track your wealth building efforts. You can parlay a particular skill or hobby into a side hustle, or take on freelance work.
Passive income is another way to grow your wealth automatically over time. Dividend-paying investments like real estate investment trusts (REITs) are a tried and true method. REITs help diversify your investments beyond stocks and bonds, and provide rental income without the time, effort and huge financial commitment that comes with being a landlord. Not sure which REITs to pick? Consider a diversified portfolio of 15 quality Singapore REITs with the Syfe REIT+ portfolio.
Avoid lifestyle creep
As you start to earn more in your 30s, things that once seemed expensive – a new pair of Jimmy Choos or a fancy car upgrade – can look more like things you deserve after yet another stressful week at work. Lifestyle creep, the gradual increase of your spending as your salary increases, can be hard to notice at first, but it does have insidious effects. As you slowly get used to a more luxurious lifestyle, you may start missing your savings target (experts recommend saving at least 20% of your income) or even racking up credit card debt to fund your purchases.
It’s natural to want to enjoy the finer things in life, but if you find yourself straying further from your savings target each month, lifestyle creep may be your roadblock to wealth building. A simple way to avoid lifestyle creep is to spend intentionally. Resist impulse buys and always pay yourself first by contributing to your retirement fund or any other long-term goal.
These 5 financial moves can help you make the most of your 30s. Apply them consistently and you’ll soon savour the fruits of your labour.