Yahoo Finance 6 Tips To Increase Your Net Worth in Your 30s
Being in your 30s may entail going through many transitions, such as starting a career, buying a house or starting a family. And knowing where you stand financially — such as knowing what your net worth is and how to increase it — can help set you up for decades to come.
Find Out: 7 Ways the Upper Middle Class Can Become Rich in 2024
Try This: 6 Genius Things All Wealthy People Do With Their Money
Sponsored: Owe the IRS $10K or more? Schedule a FREE consultation to see if you qualify for tax relief.
What Is Net Worth?
First, understanding what net worth means and where you stand might help you make some financial adjustments that could bolster your finances.
Simply put, your net worth is your assets (what you own) minus your liabilities, or debt (what you owe). And as the Federal Deposit Insurance Corporation (FDIC) explains, it is a good indicator of your financial health and a better measure of your financial stability than income alone.
“Your 30s are a key decade to solidify your wealth, and making the right, or wrong, money moves can have a huge impact,” said Kelly Palmer, founder and chief wealth officer of The Wealthy Parent.
For instance, according to Palmer, to increase your net worth, you need to first ensure you are saving and investing.
“A common mistake I see is clients saving automatically each month but forgetting to invest their savings. Check on your investment accounts today to make sure they are invested,” added Palmer.
Here are some additional tips that can help you increase your net worth in your 30s, according to experts.
Explore More: How Far a $100,000 Salary Goes in America’s 50 Largest Cities
Keep Your Living Expenses Low and Avoid Lifestyle Creep
Your 30s can be the time when lifestyle inflation — or upgrading your quality of life — can really kick in.
“As best as you can, try to keep your living expenses low, and you can try to invest that extra money you would have otherwise spent,” said Brett Holzhauer, personal finance expert at M1.
Anne Lester, personal finance and retirement expert, author of “Your Best Financial Life,” echoed the sentiment.
One way to avoid lifestyle creep is that every time you get a raise or some extra money — such as bonuses, gifts, tax refunds and inheritances — save at least half of it, she said.
“Don’t let your base-line expenditures — housing and car payments especially — go up as fast as your income,” she added.
Use Tax-Advantaged Investment Accounts To Lower Your Tax Burden
Taxes can be one of the largest bills you pay throughout your lifetime. However, there are legal ways to keep your tax bill lower by investing for the future, according to Holzhauer.
“Tax-advantaged accounts include an employer-sponsored retirement plan like a 401(k), Roth IRA, Health Savings Account (HSA) — among others,” he added.
Get Rid of Any High-Interest Debt
Most people are adding to debt in their 20s: college, cars, home purchases. So, as you move into your 30s, take a bite out of some of those relative to savings, so you don’t continue to have interest payments weighing you down into your later working years, said Peter Hoglund, AIF, CFP, SVP and financial advisor at Wealth Enhancement Group.
“Focus on the highest interest payments, especially those where most of your income goes toward interest, not principal,” he said, adding that any overpayment on these loans will go towards the principal, and a small additional monthly payment can knock years off the back-end payoff.
Consider Switching Companies for Higher Pay
Another tip that can help you boost your net worth is to shop around for a new job. Indeed, the trend of staying at one company for the majority of your career is long gone. In fact, Holzhauer noted that you could potentially be hurting yourself financially — according to Forbes.
So, for instance, if you haven’t received a noteworthy raise in the last few years, now is the time to look around.
Open a 529 Savings Plan
A 529 savings plan is a tax-advantaged investment account designed to pay for education. Contributions are made on an after-tax basis, and withdrawals are exempt from federal and state income taxes, if they’re used to pay for a qualified educational expense, Adam Koprucki, founder at Real World Investor, explained.
“An interesting feature of 529 plans is that there is no limit on the number of plans that can be opened, but the contribution cap applies per state,” he said. “So, if you’re wealthy enough, you could fund multiple 529 accounts for your children, grandchildren and relatives, if they live in different states. Also, you can open a 529 plan in your own name and transfer it to a new beneficiary at a later date.”
Get Life Insurance
Your personal life may be changing — you’re getting married, maybe having children — so it’s time to review your life insurance coverage.
According to Adam Schwery, Country Trust Bank financial advisor, while you may think that what you have at work is sufficient, it’s likely not enough.
“Working with an insurance agent to address your coverage needs is critical for your family to remain in their current lifestyle during this most challenging time in their life. Don’t just account for the highest breadwinner in the family. Other large expenses, like daycare, need to be considered if your spouse is no longer able to care for your children when you’re at work,” he added.
Save… and Invest
Your 30s are the absolute best time to set yourself up for an increase in net worth, and the best way to do so is to invest in the stock market, said Robert R. Johnson, PhD, CFA, CAIA, professor of finance at Heider College of Business, Creighton University.
“First of all, the greatest asset for building wealth is time. Achieving true financial security and wealth is done not by simply saving, but by both saving and investing,” he said, adding that because of compounding, time is the greatest advantage of investing. “Too often, people rationalize that they will begin saving when they make more money, only to realize that it is easy to simply let spending increase commensurate with salary.”
More From GOBankingRates
Frugal People Love the 6 to 1 Grocery Shopping Method: Here's Why It Works
Social Security: Can Debt Collectors Garnish Your SSI Payments?
This article originally appeared on GOBankingRates.com: 6 Tips To Increase Your Net Worth in Your 30s
