The thirtieth birthday is one of the milestones that usually forces a person to think about what they have achieved in life so far and what their plans are for the future – whether it is a career, family or housing. And one of the areas that people in their thirties should undoubtedly focus on is finance.
“The financial decisions that people in their thirties make often have a major impact on the next decade of their lives. And this also applies to steps that a person does not take at this time, either because they postpone them or completely neglect them. Unfortunately, as the years go by, it may be too late to optimally address these backlogs,” says Dušan Šídlo, an analyst at Broker Trust.
So what should you focus on in the financial field as a thirty-year-old?
Financial goals. Knowing what a person wants to achieve through money is a stepping stone to start managing finances effectively. Naturally, goals can be different – from short-term ones, which can change quickly, to long-term ones, which should be of a more permanent nature, typically for example, creating a sufficient financial reserve for retirement or buying your own housing. “Those who do not have set financial goals find it difficult to find the right strategy for managing their funds and in this area they are rather just treading on the spot, wasting time and spending money inefficiently,” says Dušan Šídlo.
Monitoring income and expenses. It is one thing to have a goal, another is to know what means a person has to achieve it. If they are not already doing so, every thirty-year-old should start keeping an up-to-date overview of their income and expenses, and adjust their budget accordingly. The purpose is to create such a balance sheet where, after the necessary expenses have been paid, there are still free funds that can be used in terms of their future appreciation.
Paying off debts. Paying off debts from your youth, typically from credit cards or overdrafts, should be a priority if you have free funds. Not only does this debt burden burden his budget due to interest, but it can also become a burden, for example, when applying for a mortgage or loan later, which are to be used to acquire assets that will store value in the long term. “A bank may refuse to provide, for example, a mortgage in a sufficient amount to acquire the desired property due to existing debts,” points out Dušan Šídlo.
Financial reserve. Keeping money aside in case of sudden expenses, loss of job or, for example, long-term illness is another priority. “A sufficient reserve that can prevent falling into financial distress should be enough to pay debts and necessary living expenses for six months,” says Dušan Šídlo. In such a case, the money should be immediately available and not stored in long-term financial products (such as term deposits, building savings), from which it can be withdrawn only for a fee or at the loss of state contributions. From this point of view, a current bank account seems to be ideal, but given the current minimum interest rates, it is worth considering whether to leave more than the necessary amount of money in such an account.
Career and education. People in their thirties should also think about their work career. They already have a few years of experience behind them and should consider whether they receive an adequate salary and whether they really do what fulfills them. The possibilities for changing jobs are still wide open at this age. It is also crucial for professional and personal growth not to end education at school, but to continue it during employment, whether independently with the help of literature, the Internet or various organized courses.
Pension insurance. Although people in their thirties are still far from retirement, they should provide for their old age as soon as possible. This is because they make the most of the effect of long-term interest on the money deposited, where the simple rule applies: “the longer, the better”. They do not have to save thousands of sums right away, but start with a few hundred crowns and increase their deposits according to how much money they have available. One of the most used ways to ensure an improvement in retirement in the Czech Republic is supplementary pension savings in the so-called Pension Savings. participation funds, where it is also possible to use employer contributions and tax reliefs.
Investment. In addition to conservative investment options, such as building savings or the purchase of government bonds, thirty-year-olds do not have to worry about instruments that have a slightly more dynamic strategy and promise higher profits at the cost of higher risk when regularly investing smaller amounts over a longer period of time. Such an option is, for example, some mutual funds. Even in this case, thirty-year-olds “play into the hands” of spreading their investments over a longer time horizon. “The long-term nature of the investment usually compensates for short-term market fluctuations,” adds Dušan Šídlo.
Insurance. When a person is twenty and doesn’t have any property of their own, they don’t see any reasons why they should think about insurance. However, people in their thirties who are starting to grow their careers, enter into long-term partnerships, become parents and increase their assets should already start thinking about suitable insurance, because it can help them and their loved ones maintain the set standard of living when they are not able to take care of it themselves. But whether it is property insurance or risk life insurance, it is necessary to choose carefully.
“It is important to be guided by the fact that the quality of the policy is not determined by its price, but by the scope of coverage. There are a huge number of products on the market that are difficult for laymen to understand. In such a case, it is useful to seek independent experts who can advise you on choosing a suitable policy,” adds Dušan Šídlo from Broker Trust.