6 Crucial Personal Finance Strategies for Investors in their 30s
- Peter Lazaroff, CIO of Blanccorp, offers important advice for investors in their 30s.
- “The financial decisions you make in your 30s will affect you for the rest of your life,” he said.
- From consolidating investments to optimizing debt repayment plans, here are six strategies to consider.
Because Time is valuableThere is one universal truth that all investors can agree on: the earlier the better, at least when it comes to investing.
Supposedly, Albert Einstein called once Compound interest The most powerful force in the universe. It’s a viable idea at any stage or your investment career, although personal investment preferences may change over time depending on individual life goals.
One particularly pivotal stage for personal investing is in your 30s, according to Peter Lazarov, chief investment officer at wealth management firm Plancorp, which manages $6 billion in assets.
“Once you get into your 30s, the looming worries about graduating, starting a career, and getting out of the student loan debt hole are replaced by more domestic concerns,” Lazaroff said. finale episode From The Long Term Investor Podcast, citing Marriage, Parenting, and The average age for a first-time home buyer is 33According to data from the National Association of Realtors.
He continued, “Your 30s are the time to start building lasting wealth to meet the increasing demands of life.”
In the podcast, Lazaroff shares six personal finance strategies geared specifically for investors in their 30s to consider, while explaining that this information may be useful even to those outside of that target age group.
“The financial decisions you make in your 30s will affect you for the rest of your life,” said Lazaroff. “With these strategies, you can plan for a successful retirement long before you approach the end of your career.”
6 personal finance strategies for investors in their 30s
First of all, Lazarov emphasized the importance of V.I Combine multiple investmentslike separate 401(k) accounts or Roth IRA accounts, in one easy-to-access platform.
“Gathering them in one place makes it easier to see the role each investment plays in achieving your financial goals,” he explained. “It will also help you avoid recurrence and manage general risks.”
However, Lazarov cautioned investors to be cautious about any potential tax consequences or closing costs that may be associated with the account transfers.
Subsequently, Lazarov advised investors in their 30s to Be strategic about paying off debt.
While he cautioned that everyone’s financial situation should dictate their exact payment priorities, Lazarov recommended that investors generally first prioritize paying off private loans or high-interest non-tax deductible debt, such as credit cards, then debt with private mortgage insurance, followed by debt. High-interest but tax-deductible, such as some forms of business or student loans. Tax-free debt with a reasonably low interest rate—which Lazarov rates as less than 4%—should be kept for last.
He added, “It is very important to get rid of as much of this debt as possible at this stage of life, but do not neglect investing while paying off the debt.”
For his third strategy, Lazarov advised investors Maximize their retirement accounts.
“There are so many options for investing in retirement and choosing the right one can be daunting,” he said. Lazaroff believes that the “mathematically optimal order” for maximizing retirement investments is the following: first, invest at least the minimum amount in the company’s retirement plan to receive a match; Next, contribute to a Roth or traditional deductible IRA; Then, invest the maximum amount in the company’s 401(k) plan; Finally, contribute to a non-deductible Traditional IRA to receive tax-deferred compounded growth.
For those able to invest in a health savings account, or HSA, Lazaroff recommended making this the second priority on the list, after receiving an employer retirement plan match. “This account offers a triple tax advantage: a tax deduction for the contribution, tax-free investment growth, and tax-free withdrawals when used to pay medical expenses,” he explained.
Subsequently, Lazarov emphasized the importance of Make the most of your money.
“Investing while making ends meet can be a delicate dance, especially at a point in life when financial responsibilities seem to multiply,” Lazaroff said. “The trick is knowing how much you can put away while still having enough cash on hand for immediate needs.”
Lazarov advised investors to keep liquidity to a minimum in personal investment portfolios to achieve more efficient returns and mitigate inflationary concerns.
Because checking accounts don’t earn much interest, Lazaroff doesn’t recommend keeping more than an entire month’s expenses in a basic checking account. In fact, for people with very steady income streams, keeping 25% to 50% of a month’s expenses may be enough to smooth out the fluctuations.
When it comes to emergency savings, Lazarov advised having enough cash on hand for at least three months’ expenses, ideally in an online account that offers more interest.
Lazarov also noted that investors should always Plan for the unexpectedBecause emergencies can be “financially crippling” for the unprepared.
Lazaroff believes proper life insurance coverage is essential – recommending a fixed-term life insurance policy over a permanent one – and has advocated an estate plan to protect personal assets. and with a 26.8% probability of disability For young workers before reaching retirement age, according to Social Security Administration data, it is also advised to seriously consider disability insurance coverage.
Finally, Lazarov recommended investors Get help from professionalsciting data from Vanguard showing that financial advisors can increase relative returns for retail investors by about 3%.
Although Lazaroff believes human financial advisors are only cost-effective for investors with more than $500,000 in their investment accounts, there are still options for those under that limit, such as robo- or hybrid advisors, he explained.
And once an investor crosses the $500,000 mark, Lazaroff said it’s imperative to find an advisor who not only gives investment advice, but also provides “comprehensive wealth management so that you can put your entire financial house in order and keep it that way forever.”
“This means proactively helping improve your savings plan, create an estate plan, implement tax saving strategies, insurance analysis, vesting strategies, and more,” he explained. “Perhaps most important of all, hiring a comprehensive wealth manager frees you up to do the things you love most in life and relieves the stress that can come from managing your own finances.”