How to Build Wealth in Your 30s: Simple Steps to Become Financially Free

How to Build Wealth in Your 30s: Simple Steps to Become Financially Free

“Financial freedom” is becoming a buzzword nowadays, but what does it actually mean? When it comes to learning how to build wealth in your 30s, patience, persistence, and a solid plan are at the root of this new financial freedom movement.

Here are 6 simple tips to get you started on the road to wealth-building and financial independence.

Let’s dive in!

1. Make a budget (and live within your means)

The first step to building wealth in your 30s (or at any age for that matter!) is to make a budget and stick to it.

Many people never realize how much money they’re actually spending each month and how much could be saved by simply creating a budget and learning to consciously live within their means.

How should you create a budget? Here’s a simple guide to follow:

  • Calculate your total net income for both you and your partner: make sure to build your budget based on your take-home pay each month.
  • Calculate all your fixed expenses: this includes all the expenses that are predictable and stay consistent each month like your mortgage, rent, insurance, car payments, etc.
  • Calculate all your variable expenses: variable expenses include all of your discretionary spending and bills that change from month to month like groceries, dining out, utilities, and leisure activities.
  • Set aside money for debt repayment and wealth-building: Ideally, you should be able to set aside between 10-20% of your net income for debt repayment, savings, and investing.

If you don’t have any wiggle room in your budget, start looking for fixed and variable expenses you can cut back on. Here are some ideas to keep in mind:

– Are there any subscriptions you’re not using? Netflix, Amazon, and that old gym membership may seem like nothing, but those monthly subscriptions can really add up! Take a look at where you can cut back to save some extra money.

– Are you paying high interest rates on any loans? Credit card debt can cost thousands in interest charges, so it’s always best to prioritize those high-interest loans when repaying debt. If you’re struggling to make a dent in your loan, call the bank and ask what your options are for lowering the interest rate.

– Have you shopped around for new insurance rates lately? Car, home, and life insurance premiums can creep up without us ever noticing. If it’s been a while since you’ve looked into those payments, it may be worth shopping around to see if you can find a better deal.

– Is dining out eating up all your extra cash? After work, it can be tempting to grab a ready-made meal or takeout from a local restaurant. If you’re spending a lot of your monthly income at restaurants, look into cost-effective options like batch-cooking and meal prepping.

Learning how to build wealth in your 30s isn’t always about making more money. Sometimes the quickest and easiest way to find extra money is to take a good hard look at what you’re spending and find creative ways to save!

How much money should 30-year-olds have saved?

There’s no right or wrong answer for how much you should have saved by the time you turn 30 since it depends on your income, lifestyle, and the wealth-building opportunities available to you.

Most experts suggest saving 10-20% of your pre-tax income each month for retirement. According to Statistics Canada, as of 2020, the average salary for Canadians was $54,630. This means $455-$910 would be an ideal amount to put towards savings each month.

If you’re just getting started at 30 and you’re able to invest $900 each month in accounts or investments that yield a 5% annual return, you would have just over $980,000 by the time you’re ready to retire at 65!

2. Pay off debt as quickly as possible

Debt can rack up some serious interest payments that eat into your potential wealth-building opportunities. According to BNN Bloomberg, as of December 2020, Canadians now owe $1.71 for every dollar of disposable income they have to spend.

What’s the hidden cost of high-interest debt? Let’s say you have credit card debt totalling $10,000 at an 18% interest rate. If you decide to pay $200 towards this debt, it will take 94 months to pay off AND cost you $8,622 in interest.

If you decide to increase that payment to $400 per month, your credit card will be paid off in 32 months and you’ll pay only $2627 in interest.

That means you’d be saving $5,995 which could be put towards savings, retirement, or investments that will help grow your wealth over time.

If you’re battling with high-interest loans and credit card debt, one of the fastest ways to pay it off is by focusing on the highest-interest loan first (a.k.a. “The Avalanche Method”). This method for debt repayment frees up more cash month-over-month as you continue paying down those debts.

3. Work on your money mindset

So many have us have been conditioned to believe we can’t be wealthy or that only a select few people are lucky enough to be financially secure.

Although it’s important to acknowledge the privilege of being able to work full time, earn an income, and invest in various financial markets, it’s also important to realize that it’s never too late to start investing and growing your wealth.

The first thing you can do to get comfortable with money is to start talking about it. Open up a dialogue with family and friends about savings and retirement. Talk with coworkers about financial resources available through your employer. Find financial advisors and professionals who can teach you how to build wealth in your 30s and deconstruct some of the money myths you believe.

The quickest way to change your mindset about money is to surround yourself with people, conversations, and thoughts that are different from your own.

If you’re willing to challenge some of the long-held beliefs you have about money, you’ll find new and amazing opportunities to start building wealth and take steps towards becoming financially free.

4. Learn as much as you can about investing

Everyone knows the power of smart investing, but many people are too intimidated to take the first step to get started. After all, where should you put your money? Stocks? Bonds? Real estate?

The fastest way to grow your wealth is to get educated about investing so you can make informed financial decisions.

What can you do to learn?

  • Read books

One of the simplest ways to learn about investing is to go to the local library or book store to find some books on budgeting, saving, and investing. Here are some great books to start with:
– The Intelligent Investor: The Definitive Book on Value Investing
The Book on Rental Property Investing
– Investing in Your 20s & 30s For Dummies

  • Join supportive communities

Eager to dive in and talk about investing? Find local or online communities you can join to learn all about investing. If you don’t have any business clubs in your area, look online on Reddit or Facebook for supportive communities to join. Here at Forge & Foster Investment Management, you can engage with us on Twitter, Facebook, Instagram and LinkedIn.

  • Speak with financial professionals

Take advantage of all the professional wealth-building advice you can. Book an appointment with a financial advisor at your bank. Talk to your employer to ask about RRSP opportunities. Meet with an accountant to discuss ways you can find more money in your budget to invest.

  • Attend seminars and/or events

Going to local events is a fantastic way to learn valuable financial skills and network with like-minded investors. Not sure where to find events in your area? Simply head to Google and look for investment conferences, business groups, and meetups in your local area.

The more you educate yourself about money, the more opportunities you’ll find to build your wealth.

5. Diversify your portfolio

Many of us have heard of the saying “don’t put all your eggs in one basket” and this is absolutely true when it comes to building long-term wealth. Diversifying is one of the best ways to ensure you’re protecting your money.

What does diversification look like? Simply put, diversifying your portfolio means investing in a variety of different industries, sectors, and asset classes. This could include stocks, bonds, real estate, currencies, and more.

Diversification is a key component to building wealth because it allows you to spread your money around to mitigate risk and better predict expected growth.

While investing in something like Bitcoin may bring some temporary gains, it can also be extremely volatile. Balancing out those volatile investments with the long-term appreciation from rental properties, for example, would create a more stable portfolio.

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Speak with your financial advisor about different ways you can diversify your investments for maximum growth.

6. Remember to be patient

Building wealth doesn’t happen overnight: it takes time, dedication, and patience to see the best results.

One of the biggest secrets to wealth-building is the compounding effect that comes from reinvesting your money over time. The more returns you’re able to reinvest in the market, the higher your earnings will be! This snowball effect is what creates stable, long-term opportunities.

Don’t get discouraged if you can only invest a small amount of cash at the beginning, or if your investments don’t make you a millionaire overnight. The key is to make smart financial decisions that will set you up for long-term wealth and success.

If you follow these simple wealth-building tips, you’ll be one step closer to financial freedom.

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