Your guide to financial decisions: the 30's edition

If you didn’t begin to think seriously about your finances in your 20's, your 30's are a fantastic opportunity to get things in order to prepare for the road ahead. As Ferris Bueller told us all years ago, 'lives moves pretty fast' which becomes more true every decade. You may not be thinking about it now but college tuition for your kids will be on the docket before you know it as well as your retirement and, likely, future medical expenses. So it's time to get serious. NOW.

One of the unique challenges of this decade too is that this is probably the first time in your life that your financial decisions aren't just about you; they're affecting other people, too (i.e., your partner, children).

But this time also comes it with great opportunities to leverage your increased higher earning power to build a really bright financial future. It's actually pretty exciting!

Here are some tips for making the most financial gains you can in your thirties.

Maximize your earnings.Your 30's and 40's are the bridge between education and retirement. During this 20-year span, your earning power will probably accelerate at its highest rate in your life and you’ll be able to achieve many, if not all, of your long-term goals. (Really!)

Of course, with your achievements will come the need for more security to protect yourself – and your family -- from derailing the rest of your future. It can also be a time to make sure choices you made as a young adult are still helping you succeed.

Get set for life. Once you’ve started a family (a family can be you, your partner and a dog, it doesn't always have to mean kids, by the way), it’s time to buy a life insurance policy to protect your dependents from your untimely death. This is especially the case if your spouse doesn’t work. And after a child is born, you definitely need it.

But life insurance, like life, doesn’t last forever. Once your kids no longer need financial support, for example, or if you’ve already paid off your mortgage, you probably don’t need it as much. It might be weird to think about life insurance at your age, but it's a key part in ensuring security for the future of your loved ones.

The two most important questions when buying life insurance are: what type and how much?

There are two main types of life insurance policies – the two options are term life insurance and permanent life insurance. Each have their own benefits and drawbacks. Term life insurance provides a death benefit if you die within a set number of years and typically provides nothing if you live beyond that time.

Permanent life insurance is a mix of term insurance and an investment account that pays a benefit when you die – or it pays the unaccumulated cash value if you liquidate it before your death.

For most people, including parents of a young family, term life insurance makes the most sense because it provides the most value per dollar and costs less than permanent life insurance. Permanent life insurance has accompanying fees and commissions associated with the investment part of the policy since it includes an actively managed investment. For parents of a young family, for example, term insurance delivers the best coverage per dollar.

How much do you need? The conventional wisdom suggests that you want a sum that adequately supports your children through college and your spouse through retirement. Your individual savings targets and progress can change that, however, so work with a financial planner to determine the amount that’s best for you and your family. You can also use online calculators, like this one from the American Institute of Certified Public Accountants.

On the other hand, if you’ve saved adequately for retirement, your spouse, for example, may need less support once your kids graduate. You can work with a financial planner to determine the amount that’s best for you and your family. You can also get a good idea by using the numerous life-insurance calculators available online.

Be really, really savvy about credit. Hopefully, you’ve made it to this decade with smart money habits that kept your debt burden to a reasonable level. The trick now? Keep doing what you’re doing! At this age, it can be incredibly tempting to want to break out of your discipline, especially if you have friends whose lifestyles seem to be surpassing yours. Keeping up with the Joneses is just an illusion, though. Chances are, many of the people who seem to 'have it all' are actually strapped with debt and not getting ahead the way you think they are. You might be surprised.

If you ended your 20's with debt, as many Americans do, it’s time to get serious about paying it off. Rather than derail your credit discipline, consider tweaking your budget to make savings plans for big-ticket items like vacations or high-end gadgets that you’re desperate to have. Then buy them with your debit card, never with credit.

Pay down your debt and don't accrue more. It's really easy to get caught carrying more debt than is good for your financial health, especially in your 30's. Societal pressures can add to it and so can a lack of self discipline and focus on the future. So, if this is you, it’s time to set things right by digging yourself out of the hole as soon as possible.

To begin, make a list of how much you owe each creditor and what the interest rate and expenses are for each debt. You should quickly pay down the debt with the highest interest ratedebt while paying the minimum payments on the others. Or, if you’re more motivated by results, knock out the smallest debt first, then keep chipping away.

You can also consider refinancing your debt by consolidating it into one loan, or if it’s credit card debt, onto one card. Then, start tackling your debt by paying down the bill with the highest interest rate while paying the required minimum on the rest. When you retire one debt, you move onto the one with the next-highest interest rate.

For some people, a different strategy works better like paying down your debts from smallest amount to largest, regardless of interest rates. You may pay more over time this way, but this “momentum method” might give you more of an emotional boost to keep making progress. (It feels really good to be debt free).

Follow your heart. Most people leave college, take their first job, and follow a traditional path to salary increases, with promotions and changing employers to boost their salaries. But what if your original employment path has left you both emotionally – and financially – incomplete? It might be time for a career change. An obvious way to brighten your financial future is to make more money! But if the jobs you’ve had in your 20's haven’t set you up for a steady schedule of promotions and increases, it might be time to consider a career change.

To start the process, consider what type of job might be a better fit. Take a career assessment test to help you discover hidden talents and interests that you may haven’t even thought ofdidn’t realize could turn into a career. You can also ask people you know for their insight into occupations that might fit your skills. You should also ask your peers for their input and, of course, engage in some healthy soul searching while you’re at it.

In addition to the emotional side of a career change, before making the move, you should also take a look at the pragmatic factors that can help you evaluate whether a new career is actually a sound idea. A career change should also be pragmatic, not just emotional – you should know the marketplace and hiring trends in the field you’re considering.

As the saying goes, "if you love what you do, you'll never work a day in your life." Your happiness as a human being is also vital to your achieving success financially. Don't waste your 30's in a career you hate; find a career you love and success will follow.

To Rent or to buy? This is a huge question in your 30's. And where you live is often a major factor that determines your financial well-being. For many of us, especially those living in expensive urban areas, rents can eat up to half (sometimes more!) of your income. And none of that money comes back to you; in other words, you can't write it off on your taxes at the end of the year. It's just gone right into the landlord's pocket. This is where owning a home, where your mortgage payments go toward building equity - for you, not someone else - seems like a no-brainer.

Unfortunately, that’s not always the case. While owning does build equity, you have to take into account how much a home really costs and how long you plan stay in it. Buying is often a better choice if you plan to stay longer since upfront fees are spread out over many years. Owning a home also means spending money on maintenance and repair costs, property taxes, and homeowners insurance. Technically, that’s money that renters save that they can use to invest in other areas, including their own retirement.

You can check out rent vs buy calculators online. They help you project housing fees and costs for markets you’re researching and compare those to the costs of renting in the same market.

For many, your 30's present the unique challenge of having to taking the well-being of others into consideration when making all of life's important and money-related decisions. But if you stay disciplined, plan for the future, your financial life will only continue to prosper and grow and you'll feel great sharing in that success with those you care about. Enjoy it.