Best Money Moves in Your 30s

You’re hitting your stride in your career, so it’s a great time to set yourself up for success when it comes to your finances. Here’s how from a financial planner who’s been there.

Written by Elaine King CFP® / February 10, 2022

Quick Bites

  • Use your checking account for only one thing: paying the bills.
  • There are some quick ways to minimize your taxes to maximize savings.
  • It takes years to build good credit, and just a few missteps to ruin it.
  • Now’s a great time to think about life insurance.

Many years ago when I was in my 20s, I was having dinner with my husband’s client from Italy, a very successful entrepreneur. He must have been in his late 70s, and having exhausted the typical weather and food topics of conversation, I asked him, “What is the best age to enjoy life?” He replied, “Definitely in your 30s. You are young enough to do whatever you want but old enough to be able to afford it.” And he was absolutely right. In my 30s I learned to dive, fly and travel anywhere I wanted. But this reward came with a little bit of financial prepping. Here is what I did.

Inside this article

  1. Separate your bank accounts
  2. Minimize your taxes
  3. Work on your credit
  4. Set clear financial goals
  5. Invest in financial education
  6. Buy life insurance

Separate your bank accounts

I made sure my checking account held only my monthly salary and no more than that. It was tempting at the end of the month to overspend if I saw $100 hanging out in my checking account. To avoid this, I opened a savings account with interest. This way, not only did I keep myself from overspending, but my money grew a little bit and I saved more for my goals. If you are lucky enough to get a bonus or a raise, make sure this amount gets deposited into your savings, not your checking account. The checking account should be only for your fixed obligations. And not for non-recurring items.

Minimize your taxes

As a salaried person, it’s hard to find “deductible” activities that can help you minimize your taxes. However, there are some strategies that can help you reduce your tax bill. For example, when you get a raise or a bonus, immediately prioritize an amount to increase your retirement contribution.

Also, consider adding to your health savings account so you can have money set aside for medical expenses and lower your tax bill. In 2022, you can allocate up to $3,650. If you are looking to buy a home, know that you can deduct the mortgage interest from your taxes; in 2022, the maximum you can deduct is $750,000. Also if you have a child, consider starting a tax deferral plan called a 529 for their education. You can contribute up to $16,000 in 2022.

Work on your credit

Similar to a person’s reputation, it takes years to build good credit; make one small move and you could lose it and it will take many years to build it up again. To keep your credit score high, plan to pay your bills ahead of schedule, and limit the amount you charge on credit cards to no more than 30% of the available credit (for example, if your credit limit is $10,000 only use $3,000).

Sign up for the free credit reports from the government; you can get one at every 12 months. Check the report for any errors that might be bringing down your credit score and get them corrected right away. Also, reduce the amount of credit cards you have to lower your risk of getting into debt and losing track of them. One word of caution: When closing accounts, don’t close the oldest one since it can hurt your credit score. I have a credit card from my college years that I always keep open even though I don’t use it anymore. The limit is high because it has been building for over 20 years. You never know when you may need a good credit score to qualify for a lower home mortgage rate or auto loan, so it’s smart to do what you can to increase your credit score.

Set clear financial goals

Do you want to buy a house, an electric car, a real estate investment property, finish your graduate degree or start a business? Make sure you plan it in a format that is specific, measurable, attainable, realistic and time-driven.

Let’s say you want to buy a house that costs $250,000 with a down payment of $50,000; if you save $1,500 every month for the next two years and reduce your spending by 25% during the weekends, it may be doable. However, if you plan to buy a house with no details in mind, it may not happen.

Another key goal you must have on your list is eliminating any negative debt by avoiding using a credit card to buy things if the money is not in your checking account.

Invest in financial education

There are so many ways you can save, earn and grow your money. If I were to list them all here, this article would never end, and some strategies may or may not apply to you. For example, if you chose to get married or partner with another person in your 30s, you must know how to manage finances as a couple, your legal rights, how to protect your assets, what is yours and mine and ours.

There are lots of courses and materials out there that can shed light on how to start difficult conversations such as: Should we have a joint credit card? Should we buy a house together if I earn more and my partner has more savings? What is fair and equal?

When it comes to emotions it is best to be well-educated.

Buy life insurance

A wise person told me a long time ago to go buy life insurance in my early 30s, and lock in the low rate. There can be up to a 44% increase between getting life insurance in your 30s versus your 40s if you wait.

You may be wondering, “Why do I need life insurance?” Well there are two basic reasons:

To protect your loved ones from financial stress if you pass away, assuming they depend partly on your income. Think of a spouse, kid or parent. If this is the case, you may want to get a term life insurance policy, which covers a specific period of time, typically 15 to 30 years with a set amount of dollars.

To help your beneficiaries pay the estate tax, if you have a high net worth. This year the estate tax limit is $12 million, so assuming you pass away with over $12 million in assets, any additional dollar over the $12 million will be taxed at 40%. If you have significant assets, then I suggest considering a whole life insurance policy, which is not locked in for a time period but for your lifetime and can provide liquidity to pay taxes. Estate planning with the correct advisors is highly advisable for large net worth families.

About the Author

Elaine King

Elaine King CFP®

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

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