Thriving thirties: Thirty ways to make your money work for you
Growing up is not an exact science and reaching the big 30 might mean different things to different people. You may be married with kids, recently divorced and planning to work abroad or perhaps you’ve recently started a new company, a new job, or a new degree. You may be the older version of your super organised 16-year-old self, or you may have spent the last decade coming to terms with adulthood. But no matter where you find yourself, reaching your thirties is a reminder to re-calibrate, think seriously about your current and future plans and goals, and make decisions your future self will thank you for. Here are thirty things you can start doing today, along with a skilled financial planner, to help make your thirties a breeze and set a solid foundation for the decades ahead:
Know your current situation and future goals
1. Have a realistic spending plan – create one, review and stick to it: Use your bank statement as a guideline of what you’re spending on a monthly basis, and create a table of your income and your expenses. Don’t forget to take into consideration the little things that add up. By having an honest view of what you’re spending on necessary items and non-essential items, and whether your income exceeds your expenditure, you’re better able to judge how your monthly spending needs to be adapted. See where you’re able to cut down, and make trade-offs if your expenses exceed your income.
2. Know where you’re going: Plot the milestones you would like to reach in the short, medium and long term. In the short term, you may like to repay your debts, bring down your expenses, start a degree or get married, in the medium term you may like to travel to Vietnam, have kids, and in the long term you may want to retire comfortably and live on an estate. It is only once you know what your goals and dreams are, that you can start thinking about the financial implications and the steps you need to take to make it happen.
Live within your means
3. Live on your own terms - and with your own pocket in mind: Unless the Joneses are going to pay your debts, there is no good reason to feel the need to keep up with them. It is important to dream big and have ambitious goals, but stay within your means and avoid taking on unnecessary debt.
4. Use your promotions, bonuses and raises wisely: In your thirties, you may get a promotion or change jobs. When you are promoted or get a raise, don’t succumb to the temptation of allowing your lifestyle expenses to inflate unnecessarily. If you have a great car now, why upgrade when you get a raise when you can use some of the extra money to give your emergency or retirement fund a boost, or repay your debts. By all means spoil yourself, but hold a portion back for when you really need it.
5. Use debt wisely: Differentiate between good and bad debt. With a home loan, for example, you’re likely to benefit from capital appreciation over time – and student debt incurred for a Degree, for example, can be offset by the lifelong earning potential it could bring. Exorbitant debt on depreciating assets and unnecessary items are harder to justify.
6. Pay back debt in a smarter way: If your budget only allows you to pay a small amount towards your debts, split the amount smartly. Make a list of all your debt, from the highest interest rate to the lowest interest. It may stand you in good stead to pay down debts with the highest interest rates first, and perhaps the smallest debts which can be paid easily.
7. Cash is king: If there is no good reason to make a big ticket purchase immediately, why not save up for it over time instead of buying it on credit? During this time, it also gives you additional opportunities to shop around. Once you have saved enough, you may actually find you don’t want or need it anymore, in which case, you can decide whether to add this to your other savings or make a different purchase.
8. Automate to simplify your life: Consider the benefits of automatic debits orders for your recurring expenses, as close to pay day as possible. Once all of those amounts come off, you’ll know how much you have to work with for the rest of the month and then try to stick within your budget without unnecessarily resorting to your credit card.
9. Ask yourself, how will this add value to my life? When buying something, think about how it will improve your life. Is it a need, or is it a want? Is it something you have to buy, or can you borrow it? Do you need to get the top of the range version if you’ll likely only need the middle of the range version? And will you use it? Before you go to the checkout counter, think about your purchases – there may be one or two expensive items in your trolley you’ll never really use. Do you really need to spend that much on it? If you still want something after you’ve thought about it for five days, then maybe it’s worth it. If not, you should probably take that money and put it towards your emergency fund or your debts instead.
10. Use the power of negotiation: Don’t be afraid to negotiate better prices with service providers or debt collectors. Some companies allow you to renegotiate your interest rate, or to motivate a reduction in the repayment amount. At least be prepared to shop around to find the best value at a good price.
11. Pack lunch: Packing lunch requires some planning, but is a great way to cut down on costs, and you’ll probably eat more healthily.
Small steps, big wins:
12. Re-evaluate your packages: Perhaps it’s a bank account you’re paying unnecessarily high fees on for services you don’t need, a gym contract you pay for regularly but don’t use, or a DSTV package where all the programmes you watch are on channels available on a lower package… you may save a little by downgrading where it’s necessary. Saving just R300 per month by downgrading or cancelling subscriptions means you have an extra R3600 per year to save or pay down your debts.
13. Review your values on your short-term insurances: When you first took out insurance on your vehicle, your vehicle was valued at a certain amount, and over time that value has likely dropped. It may be worth checking with your short-term insurance company what the current value of your vehicle is – and ask them to amend your premiums accordingly. Some companies do this automatically… but do this just in case they don’t.
14. Extra bursts of cash into your home loan: Typically, a home loan has a lower interest rate than shorter term debts, but once your other priorities are sorted, it may be worth playing around with home loan calculators to check if it would be worth adding an extra hundred or two to the amount you pay towards your bond. Especially if the outstanding term is long, this can bring down the repayment period, and reduce the interest payable over the term significantly.
15. Be tax savvy: Firstly, file your returns on time to avoid late penalties and understand what deductions you may and may not claim for in your circumstances (for example, if you can prove you have a rental property, keep all your slips and invoices for maintenance and repair, as you may be allowed to claim certain amounts back). Additionally, when deciding how to save, you are able to enjoy some tax breaks when investing in a tax-free investment account, and retirement annuities up to a specified amount.
16. Change your mindset about saving: It’s tempting to think of saving for the future as secondary to living comfortably now, and a nice-to-have for those who have extra money. But actually, if you’re not saving enough, later in life you’ll likely be furious with your 30-year-old self for not thinking ahead.
17. Consider your future self as one of your key stakeholders: Sharing is caring. Spare a thought for yourself at the age of sixty, seventy or eighty. Do you really want to be struggling at that age to make ends meet and funding basic necessities? With everything you earn today, give some to your current self and share some with your older self by saving into a vehicle you can tap into when you need it as a retiree.
18. At the same time, a small amount is better than nothing at all: Sometimes people don’t save for their future because they are waiting until they have better cash flow, less expenses or because there is a perception that they can catch up. However, it may be a better idea to invest small amounts from as early as possible, rather than delay saving for a few years – in which case you may find you have to save significantly more on a monthly basis to achieve the same result when you retire.
19. Aside from your longer-term savings, have an emergency stash: If you haven’t started doing so already, it’s also a good time to start putting cash into a separate savings account, building a ‘nest egg’ for life’s unexpected emergencies. Now that you’re in your thirties, you arguably earn more, but have more responsibilities.
20. Be wary of being too conservative: Of course, your personal circumstances will determine how much risk you can afford to take in your investments, but generally in your thirties, you should have enough time to recover from short-term fluctuations if you invest in higher-risk funds – which could potentially be more beneficial than investing in low-risk funds which do not offer sufficient returns.
21. Preserve, preserve, preserve: Chances are, in your thirties, you may be considering a career move from one company to another. Unless there is a very compelling reason for you to cash out your retirement savings made with that employer, resist the urge and rather preserve your savings in a suitable vehicle, possibly a preservation fund.
22. Don’t rely on your retirement savings for your kid’s university fees: It’s noble to want to give your kids the best you can afford, but not at the expense of your retirement. Especially if your perception is that they will fund your lifestyle in retirement, because this is not guaranteed.
23. Similarly, don’t blindly rely on an inheritance you may or may not receive: Sometimes people rely on the fact that they could receive an inheritance when a parent dies, and would therefore not need to save. Again, this is not guaranteed, and is a dangerous assumption.
Have a contingency
24. Work out your contingency plan: It’s never easy to think about things that could negatively impact our lives but if you think about how you or your children would survive if you lost your income due to disability or illness, or if you died, are you comfortable that you’ve made adequate provision. If the answer is no, it may be worth prioritising this today to ensure you put the right policies and plans in place.
25. Make the most of maternity leave: In most cases, those on maternity leave do not get a full income from an employer or the UIF. Consider whether a you need to provide for the shortfall in your income during this time, and what the implications will be if there are any complications.
Enhance your income potential
26. Monetise your passion: Alternatively, learn a new skill that can take you to the next level at work, or give you an opportunity to supplement your income if your employer allows you to do so. If it is something you enjoy, like a hobby that has good income potential, it may also be something you can continue to do to earn an income and remain stimulated in your retirement years.
Leave a legacy
27. Make your wishes known: If anything were to happen to you, what would happen to everything you own – your money, your property and perhaps your business. Write a Will so you have a better chance to ensure that your estate can be divided according to your wishes.
28. Empower your children to be financial responsible and independent: Involve the children in the household budgeting process as soon as they can understand what it is about. Start with simple things for smaller children – the overall intention is to make them part of the process so that they will develop an appreciation for budgeting as they get older.
Your goals are within reach, with the right mindset, and coach
29. And finally, never lose hope: Remember that you are not the only one struggling to balance your budget. Keep going, no matter what or how many times you fail. Draw up a budget and stick to it. Remember, it’s not how much you have it’s how you use it. Your financial situation does not depend on how much you earn, but on how well you manage the money you have.
30. A financial planner: Your expertise might not be in saving and finances. It could make you feel stressed. Rather consider visiting a financial planner. Together you could work on a plan that could improve your finances and, as a result, your future outcome.