Hey guys.
Robert here from The College Investor.
I am excited to talk to you today about what happens if you are a late starter when it
comes to investing and you are getting started investing in your 30s?
Last week, we talked about some things to consider when you're getting started investing
in your 20s and that's great but what if you're getting started a decade later and you're
a late starter and you're getting started investing in your 30s?
What do you need to think about?
How is it different and how can you still be successful as an investor so that you can
retire on time?
Let's dive in and talk about it.
First off, I want to share with you a little stat.
Last time, I shared with you about 30 to 40% of people get started investing in their 20s
and Gallup poll did a survey of when people started investing and they found out that
about 28% of Americans don't start investing until they're 30, so about one in four people
are late starters.
The scary part is there's still some people that don't even get started investing into
their 40s or later but that's not what we're here to talk about today.
We're here to talk about investing in your 30s, so how is investing in your 30s different
than your 20s?
Well, the biggest thing is for most of us in our 30s, it's been a long path to get here.
Chances are the reason we haven't invested to date is we didn't have enough money, we
didn't have a stable job, we didn't know what we wanted to be after school and we bounced
around a lot.
Maybe we got struck with some life events, unexpected children, unexpected health issues,
all kinds of different things lead people down a path where money and investing and
savings was a challenge in the 30s or in their 20s but now here they are in their 30s and
they know they need to get started.
Let's get started.
Let's share what you need to think about when you get started investing in your 30s.
The big thing is, is your 30s are filled with life events and investing in your 30s and
getting started investing in your 30s is going to be a game of financial balance.
I'm a big believer in financial balance.
You don't have to do investing or going to your best friend's wedding.
You can do both.
You just have to plan for it.
Some stats here is most people, a good almost 50% of men and women in America today are
getting married in their 30s or later.
The 30% of women are having their first child in their 30s, so there's a good chunk of life
events that are just now going to start happening but at the same time, you know you need to
build wealth.
The biggest thing that you need to do as you get started investing is understanding your
goals and you got to be real with yourself about all of it like your goals of finance
and what you want to save and what do you want retire, that's cool but you have to be
real with yourself about when you want to save or sorry, when you want to invest, what
life events are going to be important to you, what's really going to happen.
For most people, I really believe that you need to take care of yourself first.
This means having an emergency fund of at least six months already saved should something
happen to you because honestly, you're at this time where you have someone relying on
you.
You probably have a husband or a spouse.
You might have a child or child on the way and they are going to … Things can happen.
You could lose your job.
You can't now … Unlike when you're 22 and you lose your job and you go sleep on your
parents’ couch.
That's not a reality for most 30-year-olds, so you've got to have that six-month emergency
fund funded and there in case anything happens.
The second thing you got to do in your 30s is you need to make sure you're financially
organized by this point in time.
If you aren't financially organized, if you don't have a tool like Personal Capital or
Quicken or mint.com already set up, you need to jump on that bandwagon before you start
investing because you're just adding complexity to your financial life when you start investing.
If you're not financially organized, it can become a real challenge, so make sure you
get yourself financially organized.
Once you've taken care of yourself and you're organized and you have that emergency fund
and you're prepared you need to make sure you've taken care of your family.
Family is huge in your 30 and I'm going to keep hitting this point hard because family
is typically what changes for most Americans.
Either their late 20s or their 30s, they're getting married, they're having children and
most people are not taking care of their family financially.
It's scary to me because I have seen in the last year at least three occasions where people
have really hurt their families by not being prepared, so what I'm talking about here is
making sure you have a will, a trust.
You have life insurance and you have disability insurance.
If you have a family or a spouse, those four things are mandatory before you get really
started investing and building wealth for the future.
The reason is, is a will is going to tell people what happens to your kids when you
die.
I hate thinking about it but it's one of those things that honestly, I've seen it happen
to two of those three families, didn't have a will and my gosh, it was heartbreaking what
happened afterwards.
The next thing is a trust.
As you go and start building wealth, the trust is what helps keep the money straight after
you die.
It's nice to just have the trust set up first and then you can start adding things to the
trust afterwards.
You need to have life insurance, so we talked about life insurance on the blog about two
weeks ago.
Life insurance should be an essential part of your financial plan if anyone depends on
your income to survive so for the most part, this is a spouse or children but life insurance
can replace your income, so if you die, your family doesn't become homeless because your
income is suddenly gone from the equation.
Then, finally, disability insurance.
This is the one that most people forget about but this is almost the scarier one because
if you don't die but you're in a bad accident and you can't work, what happens?
How are you going to pay for things?
You might get social security insurance but that might not be enough or you might not
get that so you've got to have this disability insurance.
Most people get it from their jobs but if you don't get it from your job, you need to
look for it outside of your job.
It's just essential guys.
This essential tool is to protect your family before … It's one of those goals that you
have to have before you start really saving for the future.
Number three is just saving for the future.
It is deciding on how much you need to save, how you want to save.
For most people in their 30s, it's going to be a 401k or 403b and then it's probably going
to be an IRA to supplement that, so make sure you're taking advantage of those things and
we'll dive into that in a little bit.
Then, the fourth thing is deciding on what big events are going to happen and planning
for them because if they're not part of your plan, chances are you're not prepared for
them.
Are you going to be getting married?
Do you want to have kids in your 30s?
Is your best friend going to get married?
Is your sister going to get married?
Do you want to take a big vacation?
What are these plans?
What are your goals?
Those are essential questions to ask yourself as you're building this financial plan so
that you can strike a balance and make sure you're achieving everything.
Last time, we talked about whether you needed a financial advisor or a financial planner
and when you're in your 20s, we said it doesn't make a lot of sense to meet with a financial
advisor.
There's not a lot they can do for you to make a plan but that kind of changes when you're
in your 30s.
In your 30s, it can make sense to meet with a financial planner to discuss creating a
plan if you don't feel comfortable doing it yourself, so I kind of gave you a guideline
above what that plan should look like.
Take care of you.
Make sure you have a will, trust, life insurance, disability but if you don't feel comfortable
doing that, it could really make a lot of sense to me with a financial planner.
We recommend using a fee-only financial planner to put together this plan for you.
You want to pay for that service and that service should last you until your next life
event but it could be a really valuable tool if you don't feel comfortable doing it yourself.
An alternative to meeting with a financial advisor, if you just want to stick to the
investing side of finances because you feel good like you know you need to get insurance
and stuff but you just feel lost on what you should do with your investment accounts is
to consider a Robo-Advisor.
Our two favorite Robo advisors are Wealthfront and Betterment.
What these services do is they take a profile of you that you answer some questions and
they set up your investments for you automatically.
All you got to do is deposit money into those accounts and you can know that your investments
are doing their thing like they should be because these companies are handling it for
you.
Really keep that in mind as you're getting started investing in your 30s.
What account should you be investing in in your 30s?
Well, in your 30s, the big thing is that you need to invest more than you invested in your
20s.
In your 20s, we kind of shared with you that you could start about $3,200 at 22 and you
will be fine.
You will reach a million dollars by the time you're 62 but the scary thing is by the time
you hit 30, if you want to reach a million dollars by 62, you're up to $6,900 a year
that you need to invest and if you wait all the way to 39, you're spending $15,300 a year
to try to reach that million dollar goal.
It gets really expensive, so the earlier you start, the better and the more you save, the
better you'll be.
The best order for most people to save for the future in their 30s is to first contribute
your 401k up to the company match.
Most companies offer a match whether it's like 5%, 6%.
Whatever that number is, make sure you're contributing to that match.
Then, you should be maxing out your IRA up to the contribution limit, which for 2016
was $5,500.
Then, after you do your IRA, you should go back to your 401k and you should continue
to try to max out your 401k.
Now, that's a really high limit for most people.
That's $18,000 and that could be a stretch but it's a good stretch because really, you're
just saving for yourself for the future.
Another couple things to consider is if you qualify for a health savings account or an
HAS, you should really try to contribute to the max because all that money works just
like an IRA and we talked about that on the blog.
Then finally, if you're earning a side income, you should take advantage of a SEP IRA or
a solo 401k to try to save even more and that'll save you on the taxes that you're going to
pay with your side income.
Part two is if you haven't started earning a side income, maybe you should look at it.
If you're not achieving your income goals yet in your 30s, it's easier to start a side
income in your 30s than it is later in your life.
The biggest thing here is that you need to start.
If you're in your 30s right now, get started.
Get your goals on paper.
Go through what we talked about.
Take care of yourself.
Take care of your family and then start saving and start planning for those life goals and
if you don't feel comfortable doing it yourself, consider doing a Robo-Advisor.
It's really easy to get started.
If you look on the blog post today guys, we have a link in the description right below
this video.
You can click on it.
We have links to all that and we also have some model allocations.
If you do want to do it yourself, here's some great things to think about as you're building
your investment portfolio.
Guys, I hope that answers some questions and provides some clarity about what to think
about as you get started investing in your 30s.
Yes, you're a late starter.
That's okay though because honestly, it's better to start now than it is any later in
your life, so don't kick yourself for it.
Just jump in and get started.
Thanks, guys.
I will see you next week.