In your 30s, you may see your income rise sharply as you gather more professional experience and take on more responsibilities at work. However, factors like high inflation and housing prices may have you wondering how to start building wealth in your 30s.
“Your 30s can be a remarkable period of growth. Perhaps you have a career that is starting to take off, or maybe you’re still figuring out the profession that’s right for you,” said Abbe F. Large, a senior vice president at Lenox Advisors.
“You may be happily single or happily settling down and possibly even starting a family,” she said. “Regardless of the individual path you’re on, you’ll make a lot of important life decisions in your 30s, including when it comes to your money. The actions you take now can help strengthen your financial security for decades to come.”
6 strategies to start building wealth
1. Get rid of debt: Your path to wealth
Carrying consumer debt or student loans impedes building wealth. Unfortunately, Federal Reserve data show that the 35 to 44 and 45 to 54 age groups have the highest median debt levels.
In your 30s, do what you can to clear the decks. That gives you the advantage of using more of your income as a wealth-building tool.
“The 30s are also a great time to start saving for buying a house and saving for retirement, but debt paydown needs to come first, along with saving an emergency nest egg liquidity of three to six months’ worth of living expenses,” said Donna Stefans, an attorney in Woodbury, New York who specializes in estate planning, wealth preservation and tax preparation.
2. Maximize employer's retirement plan match
If your employer gives a match up to a certain percentage on your 401(k) contributions, be sure to invest at least up to that amount.
“Make this a mandatory part of your financial plan. You are literally throwing free money away by not saving in your company retirement plan to at least match the amount,” Stefans said.
As an example, the chart above shows the difference a dollar-for-dollar employer match of just 3% can make to the ending balance of a 401(k). In this hypothetical situation, two 30-year-old employees contributed $5,000 per year over 35 years and earned a 5% annual return, but the employee who received the employer match ended up with nearly $140,000 more by age 65.
3. Contribute to an IRA for wealth accumulation
If you’re self-employed or your employer doesn’t offer a 401(k) or similar plan, then an individual retirement account (IRA) is a great place to begin saving your nest egg.
IRAs come in two flavors: traditional and Roth. A traditional IRA is funded with before-tax dollars, reducing your tax bill now. However, withdrawals after age 59 1/2are taxable.
A Roth IRA is funded with after-tax dollars. Since you’ve already paid taxes on the money you contribute to a Roth IRA, your withdrawals in retirement are tax-free.
| Key features | Traditional IRAs | Roth IRAs |
|---|---|---|
Contributions | Made with pre-tax dollars and grow tax-deferred | Made with after-tax dollars and grow tax-free |
Tax deductibility | Tax deductible but the amount may be limited | Not tax deductible |
Income restrictions | Anyone with earned income can contribute | Amount of contribution may be limited above certain income levels |
Withdrawals | Required once the account owner turns 73 | Not required until the death of account owner |
4. Maximize your retirement savings
Maximizing your retirement savings is a smart idea, Stefans said, because it lowers your tax burden as you add to your retirement savings.
“The money you put away in your 30s can grow immensely by the time you're in your 60s and looking forward to your retirement years,” she said.
| Retirement account | 2024 contribution limit |
|---|---|
Traditional IRA | $7,000 ($8,000 for savers 50 & older) |
Roth IRA | $7,000 ($8,000 for savers 50 & older) |
401(k) plan | $23,000 ($30,500 for savers 50 & older) |
5. Stick with stocks for long-term goals
As a broad asset class, stocks are riskier than bonds, but they have also proven to higher returns over time. For investors in their 30s, that’s a sensible tradeoff.
Not only do 30-something investors have time on their side to make up for any declines during the market’s inevitable down years, but they can also take advantage of compound returns as equities grow.
To mitigate the risk of single stocks, investors can use exchange-traded funds (ETFs) or mutual funds.
6. Build wealth by purchasing a home
With home prices out of reach for a large number of people these days, many would-be homeowners find they need some patience in their 30s.
“Purchasing a home can be a great way to build wealth, but it shouldn’t be your only focus,” said Mitch Strobel, a CFP and financial advisor at Armstrong, Fleming & Moore. His firm doesn’t recommend forgoing all contributions to retirement savings to solely focus on building up a cash reserve for a house downpayment. “That could take a while, and you would likely miss investment and interest appreciation on the additional contributions along the way,” he said.
Those interested in purchasing a home should also take into account other expenses like property taxes and maintenance, which can be significant.
The importance of a solid financial plan
If you begin the process of financial planning in your 30s, you’ll set yourself up for better stability in the coming decades.
In your 30s, a financial plan should cover items such as budgeting, debt reduction, emergency savings, retirement contributions, investment strategies, insurance coverage and longer-term financial goals.
“Life comes at you fast in your 30s,” said certified financial planner (CFP) Stephen Kates.
“Many people in their 30s are getting married, having children, buying a house, caring for parents or relatives, sometimes all of the above, and it can be physically, mentally and financially taxing,” he added.
He pointed out that having a solid financial plan provides guardrails to protect the life you are trying to build.
“If you have a spouse, this plan should be mutually defined and discussed openly. When life events happen, it is time to view them in light of your goals and redefine your plan if necessary,” Kates said.
Creating a plan first gives you insight into your current financial picture, as well as issues that might be lurking.
People are often surprised when they begin digging into the reality of their financial picture, said Strobel.
“Having a financial plan creates a course of action to get to where you want to be and can provide vital positive reinforcement along the way, while also giving you the ability to look back to see how far you’ve come,” he added.
Determining your investment goals in your 30s
In your 30s, you can determine your investment goals by considering your risk tolerance, financial obligations and aspirations for major life milestones like home ownership or education funding.
Risk management
At this point in your life, your time horizon is still relatively long, meaning you can take more investment risk than people who are much closer to retirement.
“Your investment goals for your 30s should reflect the life you have,” said Kates. “If you are a high-flying, single person, then you might be able to afford to take more risk.”
Thirty-somethings who are already homeowners, or are married with children, should focus on wealth for the long term, rather than playing the market with meme stocks or other more risky investments and trades.
“The bottom line is risk management is becoming a lot more important for you, and your investments should reflect that,” Kates said.
Invest in yourself
When assessing investment goals in your 30s, keep in mind the effects of increasing your career skills simultaneously.
“Think of yourself as running two businesses: You are the CEO of your career and intellectual capital business, and you are the chief investment officer of your financial assets,” said Drayton D’Silva, founder and CEO of Tower Hills Capital in New York City.
“You will do more for your long-term wealth by focusing on growing your income by building skills and building a strong professional network for your career than you will by eking out a few basis points of return in your stock portfolio by actively trading in the stock market,” he added.
Regarding portfolio allocation, D’Silva said investors in their 30s are likely underinvested in equities relative to bonds since their salary effectively gives bond-like income.
“So after setting aside enough to cover living costs for six months and any major expenses like a wedding or downpayment on a house, you're probably better off allocating a much higher percentage of your portfolio to equities,” he added.
Learning about investing: How to get started
While there’s no shortage of investing education available, knowing where to start can be difficult.
When looking at how to build wealth in your 30s, familiarizing yourself with how the market works is a good place to begin.
Buy what you know
Burke Koonce, investment strategist at Trust Company of the South in Raleigh, North Carolina, said — for beginners — he likes the “buy what you know” approach of Peter Lynch, who ran the Fidelity Magellan Fund for many years.
In his book, “One Up On Wall Street,” Lynch touted the advantage that investors have when evaluating investments in companies that make the products they use every day.
“McDonald’s makes great burgers. Nike sells cool shoes. Apple’s products are virtually indispensable. That doesn’t mean that the manufacturer of every product is a good buy, but it’s a great first step in becoming aware of the opportunity that surrounds us all,” Koonce said. “Plus, it’s fun, and having fun makes it easier to learn.”
Begin with a budget
Stefans said new investors should actually begin with their budget.
“How much can you invest after your bills, debt and emergency nest egg are covered?”
“Once you figure that out, research different investments,” she said, recommending that new investors in their 30s understand basics such as:
- What is a mutual fund?
- How much can you earn in the bank compared to the stock market?
- How much time do you have to reach your short- and long-term goals?
“To become more knowledgeable about investment choices, I suggest watching business news on television, listening to podcasts and doing some reading on essential investment topics,” she said. “Luckily, there is a ton of information available about investment tools and strategies and what's happening in different markets.”
Frequently asked questions (FAQs)
The best ways to build wealth in your 30s include paying off debt, making regular contributions to qualified retirement accounts, such as a 401(k) or an IRA, and taking advantage of an employer match if it’s offered.
Retirement plans are a proven way to build wealth. Maximize your contributions, at least to the extent you can, with an eye on contributing the full allowable amount as soon as possible during each tax year.
If you’re self-employed or a freelancer and don’t have access to an employer-sponsored plan, consider using either a traditional or Roth IRA to stash away money for retirement. Some self-employed individuals and small business owners may also be able to use SEP IRAs and solo 401(k)s.
Purchasing a home can be a significant contributor to building wealth in your 30s, but don’t forget to factor in other expenses, such as property taxes and home maintenance, which can add up.
To start investing to build wealth in your 30s, learn about the market. Understand the risk factors of stocks versus bonds and how to incorporate vehicles such as ETFs and mutual funds into your investment strategy.
