How to Build Wealth in Your 30s

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How to Build Wealth in Your 30s

Many people experience a significant increase in income by the time they reach 30 years old. In fact, the average annual income of someone 20-24 years old was $35,568 in 2022, compared to $50,700 earned by those who were 25-34 years old (source).

In your early 30s, you may have established the foundation for your career, which explains the 42% increase represented in the stats above.

Although your income is likely higher than it was just a few short years ago, you may have significant expenses and important life changes that require financial disciple. Many 30 years olds are saving up to buy a house or thinking about starting a family.

As a result, most 30-somethings take their finances more seriously than they did in their 20s.

When I was in my late 20s, I set the goal of reaching $1 million in net worth by the time I turned 40. At 30, I’d made very little progress, and my net worth was less than $100k. But with discipline and significant career growth, my wife and I were able to reach that milestone before I turned 38 (I’m 44 now).

How to Build Wealth in Your 30s

With the right attitude, discipline, and focus on saving, it’s possible to lay a strong financial foundation in your 30s that can set you up for long-term success.

It may seem daunting at first. But if you break down your goals into manageable steps and stay consistent, building wealth in your 30s is within reach.

In this article, we’ll cover specific strategies to help you make progress toward reaching financial freedom as soon as possible. 

1. Establish Your Goals

Setting clear financial goals is the first step to building wealth in your 30s. What are your short-term, mid-term, and long-term goals?

Short-term financial goals might include saving for a down payment on a house or car, eliminating credit card debt, or establishing an emergency fund. Mid-term goals could be related to investing for retirement (reaching a particular milestone). Long-term goals might include hitting a certain net worth figure, building a sizeable investment portfolio, or retiring.

Your short-term and mid-term goals should lead you in the right direction to reach your long-term goals. I like to start with my ultimate long-term goal and work backward to ensure that the short and mid-term goals are appropriate.

Your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Time-Bound. 

  • Specific – Make sure your goals are clear and well-defined, with no gray areas. For example, building an emergency fund of $25,000 is specific. The goal of building a big emergency fund is not specific because it leaves doubt about how much you need to achieve the goal.
  • Measurable – Most of your financial goals will have numbers, which means you’ll be able to measure them. If your goal is to earn a high salary, that’s not specific or measurable.
  • Achievable – Make sure the goals you set are realistic. You should challenge and push yourself, but you don’t want to stretch it so far that the goals are unrealistic. You’re likely to lose motivation if your goals are unreachable.
  • Relevant – Make sure all of your individual goals contribute to the larger overall goal of achieving financial freedom.
  • Time-Bound – Set deadlines for when you want to reach each goal. No goal should be open-ended. A deadline pushes you to achieve the goal.

You can create as many goals as you’d like. However, try not to create too many that you’re losing sight of goals because they’re splitting your focus. Generally, having 1-3 goals each for the short-term, mid-term, and long-term works well for most people.

The deadlines you choose are also up to you. For most people, a short-term goal would be 1-5 years. A mid-term goal could be 5-10 years away. And long-term goals generally have a time frame of more than 10 years.

Goals are incredibly important because they keep you motivated and focused on the things that are important to you. As you work to achieve your goals, you’ll see that pursuing the goal impacts your decision-making and discipline.

2. Create a Budget

Creating a budget is the second step to building wealth in your 30s. A budget will help you track how much money you’re making, spending, and saving each month. It’s important to understand where your money is going so you can adjust accordingly if needed and use each dollar wisely.

Your budget should include all your income sources and expenses (both fixed and variable). Fixed expenses remain the same from month to month, like rent or mortgage payments, insurance, etc. Variable expenses change monthly, such as grocery bills, utilities, or entertainment costs.

I recommend tracking your expenses for a month or two before creating your budget, so you know exactly how you’re spending money now. This helps you create a more realistic budget, instead of just pulling numbers out of a hat.

Once you’ve tracked your expenses and know where your money is going, you can make adjustments. You may be surprised to see how much you spend at restaurants or in other categories. If that’s the case, reduce the amount in your budget to force yourself to cut back in those areas.

Your budget must include line items for savings. If you don’t put savings into your budgeting, you’ll only save whatever is left over. Typically, there’s not much left over, so you need to budget based on your desired savings rate. You should be saving and investing at least 10-15% of your income, but more is ideal, especially if you have ambitious goals.

After you’ve created your budget, you should continue to track expenses. Without tracking expenses, you’ll have no way to know if you’re sticking to the budget.

If you need help, see our article How to Create a Budget That Works.

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3. Build an Emergency Fund

An emergency fund is an important part of financial security. It’s money set aside in a savings account or other liquid account so you can access it if something unexpected happens. This could include a job loss, an accident, unexpected medical bills, home repairs, or a family emergency.

Generally speaking, you should aim for three to six months’ worth of living expenses in case of an emergency. If you spend $5,000 per month, your emergency fund should be $15,000 – $30,000.

If you can’t save that much right away, start small and slowly grow the fund over time by contributing regularly and increasing the amount as you’re able. Even a small emergency fund will protect you from some emergencies.

Without an emergency fund, you’re more likely to rack up credit card debt or to need a personal loan. This type of debt can derail your financial progress, so it’s best to protect yourself.

4. Eliminate Debt

The next step is to eliminate any high-interest debt. This can include credit cards, student loans, auto loans, and personal loans.

Start by listing all your debts and arrange them from the highest to lowest interest rate. Then make extra payments towards the debt with the highest interest rate until it’s paid in full. Once it’s paid off, move on to the next one on the list and repeat until all your debt has been eliminated.

This approach is known as the debt avalanche. Another approach, the debt snowball, involves paying off the debt with the smallest balance first and working your way up.

Read our article Debt Snowball vs. Debt Avalanche to determine which approach is right for you.

Once your debts are paid off, you’ll have more money to save and invest each month. If your debt payments total $1,000 per month, that’s an extra $12,000 you can save each year once it is paid off!

5. Prioritize Retirement Savings

Retirement Savings

When it comes to investing in your 30s, it makes sense to prioritize saving for retirement. It may feel like retirement is too far away, but saving and investing in your younger years will have a profound impact. The money you invest now will have more time to compound and grow, so it’s essential to start investing as soon as possible.

If your employer offers a 401(k) plan, that’s an ideal place to begin. These employer-sponsored retirement plans have significant tax advantages, such as pre-tax contributions and tax-free growth.

Additionally, if your employer offers a 401(k) match, make sure to contribute enough to receive the full match every year. For example, if your company will match 50% of up to 6% of your salary contribution each year, then make sure you contribute at least 6%. The money matched by the employer is like getting an extra 3% of your salary added to your 401(k). That’s free money. Don’t pass it up.

Another option is to invest in an Individual Retirement Account (IRA). There are several types of IRAs, but the two you need to be aware of are Traditional and Roth. Traditional IRAs offer similar tax advantages as a 401(k). Your contributions can reduce your taxable income, and you’re not taxed on the growth.

Roth IRAs do not reduce your taxable income, but you won’t be taxed on the growth, and qualified withdrawals in retirement are also not taxed.

You can contribute to an IRA and a 401(k). In 2023, you can contribute up to $22,500 in a 401(k) and up to $6,500 in an IRA. The IRA tax advantages phase out at certain income levels. You can see those details from the IRS to determine eligibility.

6. Determine Your Investment Plan

Saving and setting money aside is essential, but you’ll also need to determine how to invest it. Thankfully, investing doesn’t have to be complicated.

If you’re looking for a simple approach, you can invest in index funds or adopt the three-fund portfolio. Both approaches can provide solid long-term growth while remaining passive and easy to manage.

Those who want to be more hands-on with their investments may prefer to choose specific stocks and investments. Dividend stocks are a popular choice (see our Dividend Aristocrats list). 

You can also add real estate and other alternative investments to diversify your portfolio. Fundrise is an excellent option if you want to invest passively in income-generating real estate.

The specific investment plan you choose is up to you. Just be sure that it matches your risk tolerance and gives you a chance to reach your financial goals. If you need help, speak to a financial professional who can help you create a personalized plan.

7. Invest in Yourself

Your 30s are a great time to invest in yourself. Take the time to continue learning and developing your skills to increase your earning potential.

Consider investing in courses and classes or getting certifications and degrees that will help you advance your career. The money spent on tuition may have a significant return in terms of salary, promotions, or other opportunities down the line.

And it’s possible that your employer may cover some or all of the costs for you, which means you’d only need to invest your time.

Another way to invest in yourself is to start a business. The amount you’ll need to invest will depend on the type of business you want to start. Thankfully, there are several online business models you can pursue with a relatively small investment.

Aside from an online business, you could also start or purchase a low-maintenance business that you could run on the side of your full-time job. This could be a self-serve laundromat, car wash, or vending machine business. You can see more possibilities in our article on low-maintenance business ideas.

8. Increase Your Income

Increasing your income will greatly impact your finances, assuming you save and invest the extra. While there are plenty of ways to save money, there’s only so much you can save. After a while, you’ll have trouble finding new ways to save, or your savings opportunities will become very small (diminishing returns).

On the other hand, you can always make more money. It’s not necessarily easy, but it is possible.

There are several ways you could increase your income, including:

  • Getting a raise in your current job
  • Getting a promotion
  • Taking a higher-paying job with another company
  • Changing to a higher-paying field
  • Starting a side hustle

Getting more money from your employer is ideal, as long as it doesn’t involve longer working hours or added stress that impacts your lifestyle. Unfortunately, that’s not always an option. In these cases, a side hustle can be an ideal way to make more money.

There are endless side hustle ideas and ways to make money. You may be able to find something that involves one of your hobbies or interests, so it feels less like work and more fun.

Your side hustle may even grow and turn into a full-time income.

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9. Avoid Lifestyle Creep

Lifestyle creep is a term that describes when people increase their spending as their income increases. If you’re not careful, this can be an easy trap to fall into.

Of course, some level of lifestyle creep is acceptable. Most people in their 50s don’t live the same way they lived in their 20s. But you want to avoid spending all of the extra money you make. Saving and investing most of it will put you in a better long-term position.

Avoiding lifestyle creep isn’t easy, but it helps if you stay focused on your goals and what matters most to you.

People who fail in lifestyle creep often increase spending to uphold a particular lifestyle or social status. You’ll be susceptible to lifestyle creep if you’re too concerned with how others say you.

10. Don’t Take Shortcuts

Building wealth takes time. It’s a long-term commitment. Taking shortcuts can do serious damage to your progress.

Avoid any get-rich-quick schemes or investment opportunities that promise high returns with low risk. If it sounds too good to be true, it probably is. Investing is a marathon, not a sprint.

The most reliable way to grow your wealth and net worth is by making sound financial decisions and following through on them for the long haul.

That might mean years of saving and investing to reach your goals. But as long as you stay focused and disciplined, you’ll be able to achieve financial freedom in due time.

Frequently Asked Questions

How much wealth should I have at 35?

The average net worth of 35-year-olds is $76,300 (source). However, that’s strictly an average, and the net worth of young people is significantly dependent on factors like student loan debt.

How can I be financially smart in my 30s?

The most important thing is to spend less than you make and to save and invest as much as possible. You can work toward this by creating a budget and tracking your expenses. Be sure to include savings as a line item in your budget to ensure that you set money aside each month.

What is the best way to invest in my 30s?

There’s no single answer to this question because the right investment approach will vary from person to person. However, if you’re looking for a simple investment strategy, you can consider the three-fund portfolio. If you’d like personalized help and advice, seek assistance from a qualified financial advisor.

Final Thoughts on Building Wealth in Your 30s

Building wealth in your 30s can seem intimidating, but it doesn’t have to be. With the right financial discipline and savvy investing strategies, you can create a strong foundation for financial success that will serve you well into your 40s and beyond.

By following the steps in this article, you’re setting yourself up for long-term financial stability. The key is to stay disciplined and focused on the bigger picture. Wealth building isn’t something that happens overnight—it’s a journey of consistent effort over time that leads to lasting rewards.

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