Top 3 Tips for Financial Planning In Your 30s

The wild and crazy party days of your 20s are done!

#everyoneneedsaplan - You are in your 30s now, and it's time to get serious about your financial plan to secure your financial future.

Of course everyone is different, some people want to start a family, others want to continue to build their career, but either way when you are in your 30s. You need to start thinking about how you are going to build your financial assets for that time in the future when you will not have income from employment to meet your lifestyle expenses.

There are two distinct phases in a financial plan the accumulation phase, and the income phase.

Accumulation Phase

The accumulation phase refers to the time in your life when you have income generated by employment, which you then use to build assets that will generate income to meet your expenses when you are no longer employed (or as the old people refer to it as "retirement").

Income Phase

I am loathed to use the word retirement any longer, because really the income phase of your financial plan means being financially independent, which will vary between each of us depending on our particular circumstances. Some people might have sufficient assets to generate income to meet their living expenses when they are 50 years old, whilst others may take longer to accumulate sufficient assets and not be in a position to stop working until they are 65 years old.

Indeed, some people may elect to work part-time in their later years, even if they have financial assets that does not require them to work.

We are in the new millennium now, when we don't lump all of us into the one neat little category we are all different and therefore we need to tailor our plans to suit our own individual preferences.

However, no matter what your individual benchmark for "financial independence" are, there are three financial planning priorities for when you are in your 30s.

1. You need to start to focus on building your assets.

Usually purchasing a home is the biggest asset, and therefore you need to focus on how you are going to save for the deposit and associated purchase costs.

The average savings you will need to purchase a $500,000 property is about $35,000-$40,000 including the usual minimum 5% deposit; property stamp duty and acquisition costs; and mortgage insurance premium.

Making sure you can afford to live as well as make the mortgage repayments is also key, as there is no use spending all of more income on paying back a mortgage.

Long-term savings, such as superannuation, should be taken care of by your employer, but depending on your circumstances, considering salary-packaging may also be a way to accumulate your income-phase assets faster.

Purchasing and updating your vehicles is also important to understand, and is often overlooked when preparing financial plans, which usually means you have unexpected capital expenditure (and or expenses such as having to make car loan repayments) in the future.

2. You need to start making sure that you manage your cash flow in order to understand where your money is being spent.

In your 30s is the time to getting serious about monitoring your expenditure and completing a detailed expenditure budget is the first step in order to understand what you're minimum income requirements are to meet your lifestyle, and more importantly what your surplus income is.

Your surplus income is key to understanding how you will build your assets during the accumulation phase of your financial plan.

If you are starting a family, you need to understand the additional costs associated with the family not just food and clothing, but future education expenses are also vitally important to start to plan for.

3. You need to make sure you have a personal risk management plan in order to protect what you have, and what you are intending to accumulate, in case something unforeseen happens.

The number one priority would be income insurance, as without income you will not be able to accumulate the assets you require to meet your financial plan objectives, and it is unlikely you will have sufficient assets to replace your income if you are unable to work.

You will receive a tax deduction or the income insurance premium, which will also help with your cash flow.

If you have a mortgage and other debts, you need to make sure that this debt is covered in the event of the death of the primary income earner, which could be either partner in the relationship, so that the financial objectives which rely on the primary income earner's income is replaced, or at least partly replaced.
 

If you are serious about your future financial security and would like more information about our Financial Planning Services, please don't hesitate to Contact Us and arrange your Free Financial Assessment today - because.... #everyoneneedsaplan!