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Your 30’s are a huge time for your finances. This is the decade most people transition out of financial infancy! Your career is progressing, income is increasing, and major life decisions are being made.

When it comes to the financial tools you should evaluate, consider those that address the challenges and opportunities present in your 30’s.

Let’s dive in!

Net worth tracker

Money shouldn’t be the focus of your life, but financial salience is important. What does this mean? If money is something that you mostly ignore, you are less likely to make better financial decisions.

What’s often misunderstood are the parts of your finances that should be top of mind. For example, looking at your investment portfolio more often translates to worse financial decisions. But, doing things like looking at your budget, managing expenses, and tracking your net worth are likely beneficial for long-term financial health. This keeps your goals and progress at the forefront and encourages better financial habits.

A net worth tracker can be a simple spreadsheet that you update manually or you can research apps that automatically update your balances.

Taxable investment account

If you were to look at your personal net worth statement, which areas give you the most pain or frustration? Debt is usually a stressor, but (depending on the type of debt) it’s not necessarily a bad thing. Just because you don’t like having a mortgage doesn’t mean you should rush to pay it off.

On the contrary, I find that a lot of financial anxiety can be caused by a lack of liquidity.

Liquid assets are those that can be easily accessed without penalty. Examples of liquid assets are bank accounts, taxable investment accounts, and cash value in life insurance. I wouldn’t include retirement accounts because these typically come with tax consequences and penalties.

Why do I recommend increasing liquidity with a taxable investment account?

First, money in a taxable investment account (also called a non-qualified account) is liquid! You can add as much money as you want, and you can withdraw as much as you want. While there might be capital gains, it’s not hitting your taxes as income like withdrawals from an IRA.

Second, the money can grow and compound over time. If you load up funds in a savings account, that can help your anxiety. But having too much cash will erode your purchasing power due to inflation. A better balance is to have 3-12 months of expenses in savings and any excess in a taxable investment account.

Simply put, investing in a taxable account gives you peace of mind by increasing your liquidity and allowing that money to grow over time.

Roth IRA or Roth 401(k)

Where should someone in their 30’s be investing for retirement? Roth accounts!

There are two types of retirement accounts that provide tax benefits. A Traditional IRA or 401(k) gives you a tax deduction today, but it’s taxed in the future upon withdrawal. A Roth IRA or Roth 401(k) doesn’t give you a tax benefit today. But the money in your Roth grows tax-free!

Because you still have 30+ years until retirement, Roth accounts provide a huge benefit. If invested, the bulk of the money in these accounts at retirement will be due to market growth and compounding. All of this will be tax free if used after the age of 59 ½.

How much can you sock away in Roth accounts? While there is an income eligibility limit, a Roth IRA has a $6,000 per person annual contribution limit. So, a married couple can contribute a total of $12,000 per year. A Roth 401(k) has an even higher limit: $20,500 as of 2022.

Why are these tools so important?

Of course, this list isn’t exhaustive. I can think of many more financial tools a 30-something should get: a house, life and disability insurance, an expense tracker, and estate planning documents.

But these three tools are important for the following reasons:

  • Net worth tracker to increase financial saliency and encourage progress
  • Taxable investment account to grow your liquid funds
  • Roth accounts to grow your tax-free retirement accounts

Like this post? Share it with someone you know in their 30’s!