What do you want to be when you grow up? Maybe you dreamt of becoming a doctor and saving lives. Perhaps you wanted to be a teacher or a police officer or a lorry-driver or a mum. But did you ever dream of being financially secure in your 30s?
"We spend a lot of time focusing on the career, the love interest, the big house and the dog, but we can easily forget the one thing we need to keep all these things afloat - money."
So often we neglect the one goal that allows us the freedom to go out and fulfil the rest of our bucket list. It’s time to financially secure your future because the future starts now.
In this article, we look at different ways you can financially secure your future in your 30s.
- How Much Should You Save for Rainy Days?
- Paying Off Your Debts Vs. Investing
- What Should You Do with Your Disposable Income?
- How to Diversify Your Income Streams
How Much Should Be In Your Rainy-Day Fund?
You could be the best budgeter in the world, but life will always happen.
Whether your car breaks down, or your washing machine packs up, or you’re made redundant, it’s likely that you currently aren’t prepared to fork out £1,000 for a new car, let alone 6 months unpaid leave.
This is why you need a rainy-day fund. Having money set aside to deal with financial setbacks is key to your financial security.
"You know why it is imperative to have savings, but what’s important is how you get there."
It’s common for people to set aside 10-20% of their monthly paycheck.
Sometimes, it’s not as simple as having one set amount every month. July might be filled with birthdays and holidays and festivals galore. September could be quieter than usual. December is, well, always going to be a bit of a stressful month.
The best way to build your money up is to set a goal. Your rainy-day goal. Rather than budgeting one set amount every month, put away what you can. Some months you’ll be flush with cash and can afford to put away extra, others might be a little tight. As long as you’re working towards your end goal, you’ll be working towards your financial security.
Pay Off Your Debts Vs. Investing – Which Comes First?
Is it better for your financial security to pay off your debts or invest your disposable income?
Traditionally, experts have always advised to pay off all your debts before you invest your money. But this logic is somewhat outdated. It doesn’t take student loans or alternative investments into account. So, why not do both?
Make sure you prioritise paying off any high-interest-rate debts before you consider investing.
Once you’ve tackled those high-interest loans, investing is still an option, even if you haven’t cleared all your debts. The quicker you earn money on your investments, the sooner you can use that money to pay off the remaining balance too.
Alternative investment has boomed in popularity, mostly because of the competitive rate of returns it can offer. Compared to a traditional bank, which affords around 1-2% return on savings and investments, the new investment opportunities boast a 5-7% return.
Peer to peer lending can give you around 5% returns over 1-5 years. As an example, if you managed to free up some of the higher-interest loans and could afford to invest £5,000 over 3 years, you would look to make an additional £5,385.96. This could be invested to pay off the rest of your debts or your credit cards.
"Why is it important to invest in your 30s? Money is important, but equally important is your time."
The sooner you can start to invest, the more money you stand to make. Eventually, you can even make interest on your interest. So work on those high-interest debts, then don’t be afraid to start investing before you’ve paid everything off.
How to Diversify Your Income AKA How to Make More Money
Want to make more money? It’s a no brainer. Of course, you do. But more than just attaining a larger income, diversifying your income streams means that if one fails - you’ll have the alternative income to keep you afloat.
So how do you make more money? There’s no one-size-fits-all strategy to diversifying your income, so it’s good to look at all the options and decide which fits best with your lifestyle, current income, and financial goals.
Get yourself a side hustle. There are two avenues to explore here - selling products and selling services. You could make organic candles to sell on Etsy, or you could teach piano to junior school kids (if you can actually play the piano, of course). Both business ventures will take time in their own way, but both will be healthy sources of income alongside your monthly paycheck.
Another effective way to make more money is to invest. Do you invest all of it or invest some of it? Depending on your debts, savings and disposable income, you’ll have to figure out how much you’re able to risk.
Put what you can afford into stocks and shares, or an innovative ISA, or a peer to peer lending platform and you’ll have a passive source of income which will earn you around a 5% return. Use your budget (link to internal budgeting blog post) to assess how much you can spare a month without it changing your quality of life.
With these types of investments, it can take longer to access your money. This is why it’s important to really diversify not just your investments but your assets as a whole. Then you can thrive.
How to Financially Secure Your Future: Key Takeaways
- It doesn’t have to be a consistent amount, but make sure you’re putting an amount away every month towards a rainy-day fund.
- When it comes to paying off your debts vs. investing your disposable income, you can do both by paying off the high-interest debt first and making the minimum payments on the low-interest debts.
- Diversify your income streams to protect yourself and let your money earn money for you.
- Invest your money in high return-rate platforms like peer to peer to make more money.
See how much you can earn by investing with Leap