Navigating the thriving and thrifty thirties

Reaching the big 30 is typically the age at which young professionals are expected to have made their mark.  It is also the ideal time to do some serious introspection and restructure your finances. 

To get you kickstarted, here are 15 things you can start doing today to set a solid foundation for the decades ahead:

Understand where you are and where you’re going

1. Have a realistic spending plan: Use your bank statement as a guideline of what you’re spending monthly, and create a table of your income and your expenses. This will help you to cut back and make trade-offs if your expenses exceed your income, explained Danelle van Heerde head of advice processes at Sanlam Personal Finance.

2. Know where you’re going: There is value in plotting the milestones you would like to reach in the short, medium and long term.

In the short term you may like to repay your debts or save towards a trip. In the medium term you may like to get married or have kids. In the long term you may want to retire comfortably and live on an estate.

“Once you know what your goals are, then you can start thinking about the financial implications and the steps you need to take to make it happen,” added van Heerde.

3. Live on your own terms – “On your own terms and with your own pocket in mind,” van Heerde said.

You’re typically more settled in your thirties than in your twenties and with that usually more secure. So unless the Joneses are going to pay your debts, there’s no reason to feel the need to keep up with them. While it is important to dream big, it is even more important to stay within your means.

4. Use your promotions, bonuses and raises wisely: The chances are that your career will peak in your thirties. When this happens you may be tempted to allow your lifestyle expenses to inflate unnecessarily. Instead of splurging on a new car for example, why not beef up on your emergency fund or invest further in your retirement.

“By all means spoil yourself, but hold a portion back for when you really need it,” added van Heerde.

5. Be careful of debt: Hopefully by now you’re able to differentiate better between good and bad debt.

“With a home loan, for example, you’re likely to benefit from capital appreciation over time, while student debt can be offset by the lifelong earning potential it could bring. Exorbitant debt on depreciating assets and unnecessary items are harder to justify,” van Heerde explained.

6. Pay back debt in a smart way: Maybe your budget only allows you to pay a small amount towards your debts. If so, split the amount smartly. To get started make a list of all your debts, from the highest interest rate to the lowest interest. Typically it is advised to pay down debts with the highest interest rates first, and perhaps the smallest debts which can be paid off easily.

7. Cash is king: There are many purchases that are not urgent.

“If there is no good reason to make a big purchase immediately, why not save up for it over time instead of buying it on credit?" van Heerde asked.

This may also give you additional opportunities to shop around.

8. Automate to simplify your life: While you may not be a fan of automatic debit orders it may actually be a lifesaver.

“Consider the benefits of automatic debits orders for your recurring expenses, as close to pay day as possible. Once all of those amounts come off, you’ll know how much you have to work with for the rest of the month. Then try to stick within your budget without unnecessarily resorting to your credit card,” said van Heerde.

9. Ask yourself: how will this add value to my life? When buying something the assumption is that you’ve already identified how it will benefit your life. But is it a want or a need? If so, do you need to get the top of the range version if you will likely only need the middle of the range version? And will you use it? Before you go to the checkout counter, think about your purchases. Do you really need to spend that much on it?

Soré Cloete, senior legal manager at Old Mutual Personal Finance, advised that delayed gratification is giving yourself more time to think about a purchase. This means you’ll make a more informed, less impetuous decision.

As a rule of thumb van Heerde said that if you still want something after you’ve thought about it for five days, then maybe it’s worth it. If not, you’ve saved yourself money.

10. Use the power of negotiation: Thirties often mean added confidence, so don’t be afraid to negotiate better prices with service providers or debt collectors.

According to Van Heerde some companies allow you to renegotiate your interest rate, or to motivate a reduction in the repayment amount. At least be prepared to shop around to find the best value at a good price.

11. Pack lunch: Packing lunch requires some planning, but is a great way to cut down on costs, and you’ll probably eat more healthily. This could be a win for your pocket ­­- and your hips.

12. Re-evaluate your packages:  Perhaps it’s a bank account or a gym contract that you’re paying unnecessarily high fees on for services you don’t need or really use. If this is the case consider a downgrade. This could seem insignificant, but could save you money, said Cloete.

13. Review your insurances: When you first took out insurance on your vehicle, your vehicle was valued at a certain amount, but now that value has likely dropped. It may be worth checking with your insurance company what the current value of your vehicle is and having your premiums adjusted accordingly.

14. Add to your home loan: Typically, a home loan has a lower interest rate than shorter term debts. But once your other priorities are sorted, it could be worth adding an extra hundred or two to the amount you pay towards your bond. Especially if the outstanding term is long, this can bring down the repayment period, and reduce the interest payable over the term significantly.

15. Be tax savvy: For starters, ensure you file your returns on time to avoid late penalties. Understanding what deductions you may and may not claim for in your circumstances is also helpful. Additionally, when deciding how to save, you are able to enjoy some tax breaks when investing in a tax-free investment account, and retirement annuities up to a specified amount.

And to further cut costs consider doing your own tax filing.

“Never lose hope. Remember that you are not the only one struggling to balance your budget. Keep going, no matter what or how many times you fail. Remember, it’s not how much you have, it’s how you use it. Your financial situation does not depend on how much you earn, but on how well you manage the money you have,” said van Heerde.

Enlisting a financial planner is essential. Together you could work on a plan that could improve your finances and, as a result, your future outcome.