10 Financial Habits You Need to Master by Age 30 for Financial Success
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Reading time: 4 minutes
Disclaimer: I am not a financial adviser, and this content is for informational and educational purposes only. Please consult a qualified financial adviser for personalized advice tailored to your situation.
Introduction
In this post, we identify some of the different habits we should strive to incorporate by age 30 to ensure long-term financial success. Although it is true that the earlier we implement these behavioral habits the better, readers over 30 shouldn’t despair either. Getting smarter today about money will still benefit you in important ways down the road, no matter your age. Remember that everyone is on a different journey, and, ultimately, what matters is our personal growth and that we all strive for making small, continuous improvements whenever they are presented.
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Top 10 Essential Financial Habits to Master by Age 30 for Long-Term Success
Master the Art of Living Below Your Means and Consistently Save for Financial Independence
Most people in their early twenties are probably too busy having fun and figuring out who they are and what they want out of life. But developing the habit of not overspending and of living consistently below your means will set a solid foundation for financial success later in life. As soon as you possibly can, it makes sense to start setting savings goals, even if these are very modest or if you are not entirely sure what you are saving for yet. To illustrate the importance of starting early, imagine you start saving and investing $200 each month at age 25. After 40 years investing the same amount you would have accumulated about $295,000, assuming an average 5% real return on your investments. In contrast, if you started 10 years later at age 35, investing $200 each month would only have reached $160,000, nearly half the amount.
Build an Emergency Fund to Protect Against Unexpected Expenses
The idea of setting aside a modest amount of funds is to ensure you are not derailed by unexpected financial setbacks. Many individuals in their early twenties still count with the support of their family, but still, the earlier you consider setting your own safety net, the more likely you are to have this sort of system later on when it really matters. It is typically recommend to hold somewhere between 3 to 6 months’ worth of expenses.
Avoid FOMO: Ignore Hot Investment Trends and Focus on Long-Term Wealth Building
Many financial news outlets can be a large source of distraction when it comes to setting up an investing strategy. As a rule of thumb, stay clear from the latest trend–the hot stock of the week, the sector reported to be booming during the evening news, or the latest technological breakthrough everyone is talking about. As a retail investor, we are usually too late to the table: the chances are extremely high that the information we see or read about has already been baked into the stock price. This blog advocates instead for investing passively in internationally-diversified total market index funds.
Automate Your Investment Strategy for Passive Wealth Accumulation
The idea of pursuing and achieving different degrees of financial independence is not only to gain peace of mind but also to be able to dedicate your time to the things you care about. Implement a “pay yourself first” budget; when you receive your pay check, the very first expense should be to automatically invest in income-generating assets (e.g., low-cost index funds). Figure out then how you would like to allocate the rest of your pay check to cover your monthly living expenses. Automating your investments will reduce the likeliness of second-guessing your strategy at every market fluctuation or every time you turn on the tv.
Track Monthly Expenses and Savings Rate to Stay on Course for Financial Independence
We are definitely not advocating here to spend hours each day glossing over your spreadsheets. Instead, try spending 1-2 hours at the end of each month reviewing and assessing your expenses and spending patters. This is an extremely useful habit to acquire early in life; it will not only allow you to better distinguish between needs and wants, but you will develop a sense of how different expenses affects your savings rate, the single most important factor on your journey towards financial independence.
Prioritize Your Time and Money to Maximize Financial Freedom
Be mindful of your expenses and acknowledge that you had to work very hard to earn your pay check. Unnecessarily spending on things that don’t bring us joy is not only inconsistent with honoring the effort we put in in the first place, but also means we’ll likely have to spend more time working in the future to secure our financial goals. This time could be spent differently if we are reasonably mindful today.
Conduct a Yearly Financial Review to Set New Money Goals and Save More
At the end of each year it is important to sit down and calmly reflect on your financial performance: it is time to reassess whether your outcome and trajectory is still aligned with your short and mid-term goals. What are your goals moving forward? Setting clear, achievable goals provides direction and motivation for your financial journey. The end of the year is also a good moment for revising your fixed expenses and for shopping around–are any of the competing service providers offering better deals? Now is the time to check your energy, water, insurance, phone contract, etc., and see whether you can do better.
Boost Your Financial Literacy to Make Smarter Money Moves
Strive to continuously improve your financial knowledge. Keeping up to date (reasonably, not in real-time) with financial developments and learning about personal finance strategies helps you make informed decisions. We are lucky to live in an era of abundant podcasts, books, and platforms tailored to different levels of financial literacy that previous generations could not even dream of.
Learn to Negotiate Your Salary for Higher Earnings and Career Growth
No matter the circumstances, get into the habit of always negotiating your salary. Your employer expects it and not doing so not only leaves money on the table now, but can potentially affect the trajectory of your salary throughout your entire career. Again, there is a huge wealth of information out there on how to learn the basics.
Avoid High-Interest Debt and Focus on Debt-Free Living for Financial Security
Being careful with debt in the first place or managing it effectively is an important factor that determines our long-term financial success. Avoid accumulating high-interest debt and work on paying off any existing debts as quickly as possible to prevent financial strain.
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