Financial advice you wish you knew in your 30s

Once you hit your 30s, it’s advisable to rethink youthful spending habits and start managing your money in a more mature manner.

While there are exceptions to the rule, the ‘adulting’ rubber starts to hit the road for most Australians in their 30s. For most of us, this is a hectic decade during which relationships are cemented, property is purchased, and families are started.

It’s also usually when individuals start to rise up the career ladder and begin earning a substantial income. And, after having gained qualifications and got some experience working for others in their 20s, some people start their first business in their 30s.  

While you will have accumulated some savings and possibly some assets during your 20s, you were probably too busy establishing a career and enjoying life to spend too much time worrying about long-term wealth creation. If you’re now at a stage of life where you are more focused on achieving financial and life goals, here are some tips on how to go about doing that.  

Clarify what your goals are

There are now plenty of tools and systems you can use to create a spending plan. However, sticking to one still requires self-sacrifice. If you don’t have a compelling reason to stay on the financial straight and narrow, you’ll find it difficult to resist the temptation to splurge on momentary pleasures and depreciating assets. You need to work out what your aspirations are and what sacrifices you are willing to make to realise them.

Devise a spending plan to achieve those goals

The bad news is that sticking to a budget will probably mean having less fun in the short term. The good news – aside from having a lot more fun over the longer term – is that there are ways to make the savings process less painful. Here are some options to consider:

The 50/30/20 budget

Rather than obsessing over the amount they spend eating at fancy restaurants, many people find it’s simpler to adopt a budget where half their money goes to ‘needs’ (e.g. housing, food, transportation, utilities), about a third of it goes to ‘wants’ (e.g. nights out, gym memberships) and a fifth of it is saved.

The beauty of this system is its simplicity – 70% of your income goes to meeting living expenses and saving to achieve your financial goal. The remaining 30% can then be allocated guilt-free to goods and services that provide immediate pleasure.

Like extreme diets, extreme saving regimens rarely prove sustainable. So, you could start by saving just 20% of your income. If that goes well, you can then adjust the percentages. For instance, you may opt to save 30% of your income and spend only 20% of it on non-essential goods and services.

Whatever your financial situation and financial goals, ANZ’s budget-planning tool makes it easy to keep track of what money you have coming in and how it can be best allocated. 

Pay yourself first

If you’re like most people, you pay your bills then – whatever your good intentions may be – fritter away whatever is left over. One way to consistently save money is to divvy up your pay as soon as it appears in your bank account and make sure a percentage of it is saved before you treat yourself to a new smartphone.

Let’s assume someone gets paid $20,000 a month and is adhering to the 50/30/20 budget. If they were taking a pay-yourself-first approach, every pay cycle they would immediately put $15,000 into one account to cover their bills, $7,500 into a second account to pay for any non-essential outgoings and $3,000 into a savings account.

Automate wherever possible

It’s difficult to spend money you don’t see. Chances are, if you arranged to have 20% of your pay automatically transferred to a savings account, you would soon pay as little attention to it as you do to the super contribution that is deducted from your salary.

Track your spending

It’s never been easier to collect and analyse data. And just as you’re likely to exercise more if you wear a step-counting smartwatch, you’re less likely to waste money on frivolous items if you’re confronted with evidence of your profligacy.

To use the classic example, spending $5 a day on coffee doesn’t seem like a big deal. If you’re not keeping track, you’re unlikely to realise regular small purchases eventually add up to a significant drain on your finances. However, if you download the ANZ App and use its ANZ Spendi feature, you’ll be forced to consider whether you want to keep spending over $100 eating out every day. 

Live below your means

If you get into the habit of saving some of your income early on, you’ll (a) be less likely to develop extravagant tastes, and (b) have a pool of money you can draw on if you ever lose your job, suffer a business setback, or want to take time off with your new baby.   

Consolidate your super

With retirement decades away, you probably find it hard to summon up much interest in super. But if you’re one of the approximately 36% of Australians with two or more super accounts, you could end up hundreds of thousands of dollars richer in retirement if you put all your super money in one account rather than continuing to pay multiple sets of fees on multiple accounts. It’s now quick and easy to do this online and the long-term return on this investment of a few minutes of your time could prove spectacular.    

Pro tips 

If you are in a position to start building wealth while still relatively young, there are three things to keep in mind.

  1. Compound interest is the young person’s friend. You can learn about compound interest here. The basic principle is that even a small deposit – or, even better, a series of small deposits – can snowball into a large sum over several decades. (Warren Buffett became a billionaire aged 60 and is one of the world’s richest men aged 90 in large part because he started investing money when he was 10.)   
  2. Diversification mitigates risk. Companies go bankrupt, industries get disrupted, property bubbles burst and share markets crash. That’s why it’s sensible to spread the risk across different investments.
  3. Seek financial advice. Access to expert advice can have a transformative effect on your finances, especially over the long term.

Putting theory into practice 

Zoe Morris has worked as an ANZ Financial Adviser since 2017. She has one piece of bad news and two pieces of good news for her fellow thirtysomethings. The bad news is that achieving financial security inevitably involves discipline.

“Tools such as spending trackers and strategies such as paying yourself first can be useful,” she says. “But no technology or trick is going to have anything more than a short-term effect if you’re not committed to managing your money in a mature fashion.”

The first bit of encouraging news that we’ve seen time and time again is that when people share their financial goals with someone they trust, whether that’s a friend, partner, or an adviser, they’re more likely to achieve them. “It’s easier to waver when there is no one keeping you accountable,” Morris observes. “When someone agrees on a financial goal and commits to another person that they’ll be limiting their spending to achieve that goal, they don’t want to let that other person down. That’s been my own experience, as well as that of my friends and clients.”

The second bit of encouraging news is that those with 30-40 income-earning years ahead of them have opportunities unavailable to older Australians. “One thing younger Australians can do that’s a lot quicker and easier than, for instance, purchasing an investment property is simply up their super contribution,” Morris says. “And given they have time to recover from economic downturns, younger Australians have the option of directing their super money to ‘growth’ rather than ‘balanced’ or ‘conservative’ investments. That can result in higher average returns over the long term.”