Financial Planning in your 30's

Introduction

This article seeks to discuss some of the specific financial planning that needs to be considered by individuals in their thirties. The age range between 30-40 is significant time in relation to financial planning given that it is during this time that many financial decisions will directly effect retirement plans and long term financial matters, all of which will effect future prosperity.

1. Pension Planning

If you haven't yet had opportunity to start saving towards a pension this is a critical time because failure to do so before you reach 40 will almost definitely mean that you will have insufficient time before retirement to build up a decent level of pension contributions to ensure a comfortable lifestyle.

Where possible join a corporate or government related pension plan as these employers often contribute additional amounts to whatever you can afford to save. So for instance if you put 4% of your wages/salary a month into a pension plan they will likely match it.

These schemes are often referred to as final salary schemes, as the pension provider promises to pay you a pension based upon your final salary before leaving the organisation and the level of financial contributions made to the plan. So the sooner you can start saving in your 30's the more pension contributions you will have built up by retirement and the greater your final pension pay out.

2. Property Investment

If you have not yet been able to purchase your own property, your 30's are a good time to get into the market. The benefit those in their thirties have over those looking to buy in their 20's, is that you may already have 10 years worth of savings from employment which can be used to place a larger deposit on the perfect property. This often reduces the size of the monthly repayment levels and the total amount of interest you will have to pay in the long term. Whilst the decision to own a property is down to personal choice it is advisable, as property usually gains in value and is therefore a long term investment In the future you may be able to sell your property and downsize leaving you with a healthy profit with which to improve your retirement.

Delaying a decision until you reach 40 means that your may be unable to retire early in the future due to ongoing mortgage repayments into your 60's or even 70's. In addition insurance payments that you take out for the duration of your mortgage term to protect against critical illness or disability and life insurance or income protection will be cheaper than they would be at 40 because of your age.

3. Life Insurance

Life insurance gets more expensive the older you get because the risk of death increases with age. If you have not yet thought about life insurance consider taking it out now as it will never be cheaper. Whilst no one likes to think about death, it is important to protect loved ones from an excessive financial burden should you die early. Taking out life insurance whilst in your 30's can save you anywhere between $300 and $600 dollars a year on an average policy.

4. Saving for your children's education

If you have children as you reach your 30's, planning for their future educational needs is now critical if you intend to give then a good start in life and not place excessive financial burdens on yourself another 5-10 years further along. College and university education can be very expensive. Costing between $30-40,000 per child. Whilst this figure is spread over a period of years it is important that you start thinking about how you will meet this cost now.

Also think carefully about what level of risk you are willing to expose yourself to as you save or invest for your child's College/University fund. Do you really want to invest in high risk shares where the potential to lose your original investment is significant. Try instead investing in government bonds or placing money on deposit in a high interest savings account.

Summary

This article has attempted to explore some of the financial planning considerations for those in their 30's and the commitment this requires. We have examined the importance of good retirement planning through sound pension and property investment along with the need to make contingency plans through life insurance in case of death. Finally we have explored the importance of thinking now about financing college or university education to dependent children.

Further Resources: There is more detailed information available about financial planning via the links below: (this has some excellent suggestions for maximising your income)

http://www.age-net.co.uk/business/finance/financi al_welfare.htm

http://www.medstudent.ucla.edu/offices/fao/orient ation/2006/handouts/bibliography