Note: I share a lot of personal details about investment choices and asset allocation below. This is not investment advice, and I’m not a financial planner. We recommend you consult a professional if you have questions about your investment portfolio.
With over a decade in the workforce, I’m lucky enough to be at a place with my finances that I’m well into the accumulation stage, and I’d like to level up. While there’s plenty of advice out there about how to get started budgeting, setting up an emergency fund, or paying off debt, the next steps are less obvious. “Keep saving” is certainly part of it, but as you leave the early stages of wealth building and enter the meaty middle of your career and earning years, it is also helpful to be strategic with that savings.
Below is how I plan to upgrade my own finances now that I have the basics down. I have been investing for retirement since I was 22, I don’t have any consumer debt, and my spending is more or less in check (though it could always use improvement). I have decent financial knowledge and know-how, and I feel comfortable with my foundation.
If that’s how you’re feeling, too, here are some considerations for next steps.
Open a brokerage account
I recently admitted to Lindsey that I don’t have a taxable brokerage account, or at least I haven’t been contributing to one in any meaningful way. I’ve always been focused on investing in retirement accounts, and any extra goes into my liquid emergency fund. (Also I wasn’t allowed to make investments beyond index funds at most of the financial publications I have worked for, so opening a brokerage simply wasn’t a priority!)
But my savings and retirement are in a good spot, and now that I’m married, and we have a little more flexibility with our finances, Chris and I recently opened a joint brokerage account, which we plan to contribute to monthly like any other bill.
This isn’t just about having extra money to save. We want to be strategic about where we are stashing it. I’ve been writing quite a bit recently about how brokerages are a useful tool not just for non-retirement goals, but as “bridge” accounts in retirement, too. You won’t get the tax benefits of retirement-specific investment accounts, but paying the long-term capital gains rate on any earnings is pretty nice.
Plus having different accounts with different tax treatments gives you more options. Ideally, you’ll have a mix of accounts: You want funds in pre-tax retirement accounts (traditional 401(k)s and IRAs), post-tax retirement accounts (Roths), and taxable accounts (the brokerage). This helps you essentially pick your tax rate in retirement, to a certain extent.
Alicia Adamczyk
Plus, there are no withdrawal penalties or contribution limits on brokerage accounts. So you can also use the funds stashed in a brokerage whenever you’d like, for whatever you’d like: a career break, an additional emergency fund, to start a business, etc.
“Fund the middle of your life, not just the end of it,” says Josh Brooks, a Texas-based certified financial planner (CFP). “Most people in their 30s have a retirement account and a checking account and nothing in between.”
Don’t just take it from me: While researching this article, I posed the question of how to level up your finances in your 30s to a group of CFPs, and opening a taxable brokerage account was the most popular response by far. Brooks called it the “most underrated account in personal finance.”
“Investing for retirement is great, and usually it will be tough to access that money before you’re in your 50s, minus a few specific exceptions,” adds Korinne Sugasawara, California-based CFP in her 30s. “Having some money that’s invested and growing for goals that you won’t be getting to for the next five to 10 years, and also can be accessed at any time, is a great way to have flexibility for when life changes.”
Keep investing for retirement
Of course, when I say that my retirement is in a good place, I don’t mean that I’m all done saving or on the way to early retirement. I just mean that I’ve invested consistently for the past 12 years, and compounding has already started to pay literal and figurative dividends. I’m proud of myself for prioritizing my retirement savings, and I plan to keep going.
I’ve never made enough money to max out my accounts or save substantially outside of retirement, so I’ll be working until at least retirement age. With roughly 30 working years ahead of me, I feel comfortable having a pretty aggressive asset allocation; I’m mostly invested in stocks, with a small bond allocation. You might feel differently and have a lower risk tolerance than I do. It’s good to periodically review how your assets are allocated and tweak if necessary. This article on risk capacity, rather than tolerance, may help reframe how you think about risk in your 30s.
I do want a diversified portfolio, though. One way I have been doing this is by investing a bit more in international stock funds in my IRA. This is not investment advice, but just an example of how I personally am ensuring that I don’t have an overly conservative portfolio.
If I still worked at a company that offered a 401(k), I would likely pick a target-date fund pegged to a year that is later than my actual targeted retirement date so that I’m getting the aggressive mix of investments I want.
What’s new, at least for me, is that I am not working for a company that offers a 401(k), and my husband and I are starting to strategize our retirement savings together. My IRA offers a lot more options to choose from. When I worked a corporate gig, every pay period a portion of my paycheck was withheld pre-tax and deposited into my 401(k), where the money was invested in a target-date fund I chose. (I also had a small Roth 401(k) allocation.)
Alicia Adamczyk
Life is long (if you’re lucky), and according to Morningstar, your 30s are your new 20s. If you feel behind in your retirement savings, well, there’s no time like the present to change that. There are still plenty of years ahead for compounding to do its thing.
Make a basic estate plan
I have named beneficiaries on many of my financial accounts. Doing this ensures the funds go directly to the person I want them to—and perhaps more importantly, they do not have to go through the probate process first. Who you choose for an account beneficiary has more legal weight then what you state in your will, so they’re super important.
“It is one of the most common gaps I see, usually a 401(k) or life insurance policy still pointed at an ex-spouse or a parent because nobody updated a form from a job three employers ago,” says Brooks. “It takes 10 minutes to fix, and it is the highest-return paperwork you will ever do.”
But I’d like to expand my estate planning, at least a little bit. I don’t have kids (yet), so this isn’t at the top of my list of financial to-dos. But I’ve been inspired by recent conversations I’ve had with financial experts and readers for our inheritance series.
It’s also a topic I’ve broached recently with my parents. They are now at the point where they are starting to unwind the small business they own, and they hope to fully retire soon. There’s sure to be plenty more to come on that front. (Mom and Dad, if you’re reading this…hi!)
Plan for kids’ finances
Speaking of kids, I started a small savings account for any future child I might have, and I have been reading up on all of the child investment accounts that are available. A Trump Account makes sense if my future child will qualify for any of the seed money. Otherwise, funding a 529 makes the most sense to me as a first step.
This is something else I’ve discussed with my own parents, because I know it will be important to them to contribute to their grandchildren’s education—my dad was a big proponent of 529s for my sister and me, and I think it worked out well. (I’d love to have a longer talk with him about it! Dad, if you’re reading this...call me!)
It’s a strange thing to consider when said child I’m saving for doesn’t exist yet, but if there’s something I’ve learned over the past 12 years of writing about money, it’s that you can never get started saving and investing too early. But having a plan helps.
Be smarter with my spending
Many a personal finance writer has long railed against “avocado toast” advice in the space, and I’m no exception. You know the kind: the Dave Ramseys and Kevin O’Learys of the world who decry going out to brunch or buying a cup of coffee as the reason you are in debt or can’t manage to save enough for retirement.
But most of us know these little luxuries aren’t the reason people don’t have a ton of extra money. It’s the big-ticket items that matter more, and that’s where life in America gets particularly expensive: housing, child care, health care, etc. When you can’t find an apartment in your city that’s less than 50% of your take home pay, foregoing brunch once a month isn’t going to help.
But.
Lately, it does seem like those “small” purchases are pricier than ever, and I have been questioning my own spending. What is the actual utility I’m getting out of another happy hour glass of wine or seemingly insignificant impulse purchase? I feel like my dad when I go out to eat at a restaurant these days. Do we really need that side or that drink?
Sure, making coffee at home won’t make you rich. But I think some of us who are lucky enough to have our basic needs met (ahem, myself) use that as an excuse. Everything is so expensive now, and so little of it feels worth the price. So why do I keep spending?
I’m interested in pursuing the opposite of lifestyle creep—what have I been spending on that doesn’t actually add much to my life? How can I trim that down? And how can I avoid as much of that spending as possible in the future?
Increase my income
I can’t really accomplish most of those other goals if I’m not strategic about my income and make an effort to increase it. I don’t want this to be my sole focus in life, but I also don’t mind saying that I would like to earn more money.
I am also very aware that women face an uphill battle after age 32, when the gender wage gap really begins to widen. Generally speaking, that’s when kids are coming into the picture, and women leave the workforce for caregiving responsibilities.
Still, given the decades of work ahead of me, one of my most valuable assets is still my human capital. I want to be smart about how I nurture and deploy it, especially over these next few years.
Keep things boring
One of the foundational tenants of personal finance I most subscribe to is to keep things boring. Basic budgeting, index funds, and a minimal number of credit cards and other financial tools work best for most people, and I’m not an exception.
At the end of the day, I don’t want to have so much going on that I need multiple spreadsheets and an army of professionals to help me manage it.
I stay away from things like crypto, other alternative investments I don’t understand, and new-fangled products that promise the moon. Again, these things might work for some, but most of us will end up much better off if we focus on the boring basics. If getting rich quickly were simple, everyone would do it.
“Skip the complicated products,” says Brooks. “The people who do best from here are not the ones chasing an extra half percent of return. They are the ones who decided what they want their money to do and then let the plan get boring.”
Be generous
While my dad taught me the benefits of investing early, my mom has always been a very generous person, and it’s one of the things I admire most about her and have tried to implement in my own life. I want to make sure that as I try to reach all of these goals, I don’t forget the importance of generosity.
Money in the bank is good, but helping out friends, family, and even complete strangers is something I don’t want to lose sight of. Of course, that can take a form other than money. But especially since Covid, I’ve felt a stronger desire to be generous with my neighbors and love ones, and it’s become more important to me than simply allowing my savings to accumulate. What’s it all for, if not to make life a little bit better for someone else if you can?
Obviously, there’s much more to write about: meeting with a financial planner, buying insurance, and getting deeper into the financial weeds with my husband. But for now, these eight money moves are my focus. Let me know what other tips you have for 30-somethings.
More from The Purse
Lindsey and I are toying with the idea of starting some kind of membership program that meets monthly (or every other month) to discuss money and tackle financial tasks together.
Is this something you would be interested in? Have other ideas? Leave a comment below or respond to this email!
Don’t miss:
Alicia Adamczyk
Tracy Hume
