There’s something about hitting 30.
you are still considered young at 30 and yet not that young anymore.
Many things happen when you cross the 30 mark in the many aspects of
your life. Your career should be taking off at this age, you may have
started a family or contemplating on starting one, you may have started
accumulating wealth and you may have also started accumulating debt.
were many things I should have done before I hit 30. I was listening to
my friend and colleague Marvin Germo (of
Stock Smarts) on the things he has been doing for financial readiness
and he is not even 30. Marvin mentioned many things he has done which I
only started on much later. If ever I get to do things over again, here
are the finance things I will definitely be serious about before hitting
1) Ensure you have a very healthy cash flow –
Folks in their 20s have started to earn and have begun to appreciate
enjoying their income. The problem is, they enjoy their income too well
that there is a tendency to spend every peso of it. This is a fun season
to many as they now have freedom to do what they want and have the
means to finance what they want. This is also a time of exploration to
many especially for those who had parents who were a bit restrictive
(like me as a parent), however, these explorations costs a lot of money.
Accumulation of stuff also begins at this season and lifestyle upgrades
becomes a social pressure.
Way before hitting 30, make sure you have a good grip on your money
management. Working on a written budget is the best place to start.
Learn how to allocate your income between needs and wants and make sure
that at the end of the month, there is savings left. For those in their
20s, it’s best to have 30% to 40% savings left from income which is very
possible if you have the discipline to stick to a budget. The money
behavior you will have during this period will a have a lasting impact
on your financial future so better start doing things right.
2) Minimize or resist from borrowing – Credit card
companies and financial institutions are always targeting this age
group because they understand that people in their 20s loves to
accumulate stuff, see the world and enjoy life in general — the perfect
setting to lure people into debt! Not all debt is bad but you need learn
how to discern a good debt from a bad one. Generally speaking, a good
debt is one that will allow you to grow your assets and/or add income
like a loan to finance a business or to purchase a real estate property.
Any other debt that will not grow your asset base or add on to your
income would be considered a bad debt like using your credit card to
finance your new Samsung or iPhone smart phone, a Michael Kors bag, or
your dream vacation to Bali.
People in their 20s begin to accumulate credit debt and other
consumer loans which are grossly disproportional to their incomes. The
bad credit decisions you will make during your 20s will have severe
ramifications up to your 40s and 50s. Your credit standing will also be
made or broken during this time so learn how to use credit responsibly.
investing is whey you are young! When you have a lot of time, you can
have more options on how to grow your wealth and even take in more
risks. Taking in more risks will mean that there is a better chance of
growing your wealth faster and you can ride the ups and downs of the
economic cycles. If you lose money and you are young, you still have a
lot of time to recover. The good investments for long term would be
investments in the stock market or Mutual Funds or UITFs that are
invested in equities. While they are volatile, they are bound to
generate the best returns over a long stretch of time. My friend and
investment trainer Ricky So said “take risks when you are young, if you lose your money, you still have your parents to run to” – funny guy!
Start learning how to invest and act on it. There are a lot of
seminars and training for the public on how to invest but don’t linger
with making that first investment. A good way to start would be putting
some money in a mutual fund or the UITF of your bank. Equity laced funds
like stock funds or even balanced funds are ideal for young investors.
You may also consider some on-line trading if you want to have a say
over your stock market investments. Just a note, if you will not have
the time and the competence to trade your own stocks, stick to mutual
funds or UITFs. Make your investing automatic by regularly adding to
your funds or buying more shares. In your 20s, you probably don’t have
sizeable investment funds yet but small amounts done regularly will also
produce great results. If you started investing only P2,000 every month
at the age of 21, you would have accumulated over P1 Million by the
time you hit 41 (assuming a yield of 8% p.a.). Have an auto-debit
arrangement for your investing; making things automatic does the trick.
Remember, invest early, invest wisely and invest regularly.
4) Buy life insurance – This is not a pitch for
life insurance agents but I encourage you to listen to one. If there are
people already depending on your income, do not delay in buying a life
insurance policy. Premiums are much cheaper if you buy it before you hot
30 and I also notice that premiums rise sharply when you hit your 30s
and 40s. Just remember to buy a policy you can afford. There are many
kinds of life insurance policies but I would probably stick to either a
term insurance or a Variable Universal Life insurance or VUL. Term
insurance if you want to maximize your coverage and keep your premiums
low – the downside is that you do not earn from this kind of policy. I
suggest that you buy term and also invest in mutual funds or you can buy
a VUL which is a term with a mutual fund. Just make sure you chose a
reputable provider and one who has a good record on after sales service.
For your peace of mind, you may want to limit your choices among the
top 10 life insurance companies.
5) Learn from your mistakes and the mistakes of others
– For sure, you will make a lot of mistakes in your 20s – and your 30s,
40s, 50s, 60s and 70s. Along with many other mistakes you are bound to
make, some of them are financial mistakes — bad investment decisions,
wrong borrowings, wrong purchases, etc. But that’s life and the best way
to respond to our mistakes is for us to learn from it and not repeat it
anymore. As you make those mistakes, always look for the lesson behind
those mistakes and learn to avoid them in the future.
Experience is your best teacher but we don’t always have to learn
from our own experience. You can also learn much from other people’s
experiences and in this case, other people’s mistakes. Look for mentors
who can help you and learn from their experiences and their mistakes as
Hitting 30 is a big thing and somehow, it’s a passage rite to many of
us. It is a time to learn from the past but be hopeful for what the
future will bring.
“Don’t let anyone think less of you because you are young. Be
an example to all believers in what you say, in the way you live, in
your love, your faith, and your purity.” — 1 Timothy 4:12, NLT