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How You Should Save Money in Your 30s to Achieve Financial Freedom?

Team Jar
December 2, 2022
How You Should Save Money in Your 30s to Achieve Financial Freedom?

This article describes how to plan your savings when you are 30 years old to achieve financial success and build wealth in your 30s.

I did not know much about saving when I was in my 30s and crunching through my second job.  

Money and savings at 30 seemed like an alien concept. I was enjoying life at parties, splurging and living a carefree life.

Also, in my 20s (just to go back a bit further), my salary scale was not high enough to accommodate considerable savings.

Wisdom dawned on me late in my life. By the time I was thirty-five, I had realized that I did not have much savings.

Our salaries depend on our occupation. If we are in the lucrative computer science, information technology or data sciences field, we receive a higher pay scale.

Otherwise, the median Indian salary is around Rs 33,000 to Rs 35,000 per month. This works out to Rs 4,20,000 p.a.

When the forties are around the corner, we realize that we have many household obligations and personal financial responsibilities to discharge. Also, the sunset years of retirement are just around the corner.

A thumb rule to follow is that by our 30th year, we should have saved at least one year’s salary.

When you save money in your 30s or pursue a robust investment strategy in your 30s, you are well poised to maximize your long-term wealth and meet most of your long-term financial goals.

Our total income has to be demarcated into savings, spending and debt repayment baskets.

What are the Savings Strategies and Investment Strategies to Pursue in your 30s?

In your 30s, you still have a long working life ahead of you.

In your 30s, you are young, so your capacity to assume risk in your investments is also high. You are also aggressive in your risk orientation.

Any short-term losses can be recouped over the medium or long term if you invest in equities or equity mutual funds. Therefore your asset allocation strategy should be geared towards high-risk, high-return investments.

Your average savings when you are 30 years old should ideally equal your one year's salary.

Also, because you have a long career in front of you, you have current cash flows which can take care of your lifestyle needs. This means that you can stay invested for a more extended period. 

At least 20% of your monthly earnings should go into the savings basket. Your investment strategy in your 30s should be more aggressive and oriented towards high-return investments.

If you have any educational or other loans, focus on paying off your loans by creating separate savings for them.

Make sure you create a diversified portfolio by spreading your investments in various sectors.

Build Wealth in your 30s

If your company has pension plans or Employee savings and retirement plans, make sure you contribute to PPF schemes and the National Pension Scheme.

Create a portfolio of mutual funds after consulting your financial advisor.

Make sure that you develop consistent financial discipline by saving and investing regularly. It could start with small systematic investment plans.

But over time, this builds into a large corpus.

Repay your Outstanding Debt

Nowadays, there are different types of debt, including home mortgage debt, automobile loans, student loans, credit card debt, travel and other personal loans, consumer durable loans etc., which create a debt overhang in your life.

It is better to plan debt repayments and reduce our total debt exposure. Excessive debt erodes our ability to create savings.

Typically, home loans have a more extended repayment period with staggered instalments.

Credit card debt is the most expensive element, especially if it remains unpaid. You must avoid defaulting on debt as it impairs your credit history and credit scores.

Manage and Curtail your Expenses

We all like an aspirational lifestyle, and we enjoy spending on entertainment, luxury items, and lifestyle goods. But overspending can also hurt our savings. In pursuing an over-luxurious life, we can easily be weighed down by debt. This could mean an empty savings bucket. Avoid a lot of impulse buying or frequently updating your lifestyle products. This will help keep your expenses under control.

Pro tip: Don't compare your lifestyle with others.

Average savings for a 30-year-old

The rule of thumb about the proportion of savings to your total income can be defined as “Save your age.”

This essentially means that when you are 20 years old, you should save 20% of your income. When you have hit 30, you should save 30% of your income, and when you are 40, you should save 40% of your income etc.

As the trajectory of your income graph rises, so does your savings potential (possibly, at an increasing rate).

This method will help you plan your savings and build long-term wealth that you can utilize for emergencies or leisure.

Savings Earn a Passive Income

The salary you get from your professional career may be your primary income source, but savings and investment generate a passive source of secondary income. 

Moreover, savings grow at a compounded rate when they are invested in high-yielding assets.

When you remain invested for long periods, your savings multiply and enable you to retire in comfort.

Ideally, our savings should start from our first salary. But even if you are a bit late, creating a savings and investment strategy from 30 will help you build wealth in the long run.

 

Use Daily Savings Apps to Save Money  

Daily savings apps enable you to segregate your savings from your spending money and invest it.

You can choose investments like equities, bonds, gold, etc., with small daily systematic investment plan instalments.

This process is automated, so you don’t have to remember and do this manually.

 

Key takeaways

Saving from a young age will offer you financial freedom.  

A long-term saving plan coupled with a solid investment portfolio provides you with the stability of compounded growth. You don't need to depend on others during an emergency.

Following the various steps outlined above will help you to develop financial discipline and create savings plans which will help you build wealth in your 30s, which then can be utilized in the long run.

 

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