Financial planning at any age: your 30s

For a future so bright you'll need to wear shades 24/7, your 30s are a great time to make some big financial moves. The great thing about personal financial planning is that it's based on both where you are and where you want to be. Whether you want to buy a house in the suburbs or travel the world eating tapas and jumping out of airplanes, good financial planning can help you get there. 

Remember, even if how you spent or saved your money in your 20s left something to be desired, it’s never too late to get yourself on the right path towards financial stability.

Check out this guide for tips on financial planning in your 30s. You'll learn how to grow your emergency fund, prepare for retirement, and enjoy your money without putting your financial future at risk.

What is financial planning?

Financial planning is the process of examining your finances and figuring out how to effectively achieve your money-related goals. Think of it like a financial checkup. You don't need a stethoscope, though—just bank statements, receipts, and other documents related to your financial situation.

But the real power of financial planning isn't in the knowing, it's in the doing.

Whether you're a saver or a spender, following these steps can help you build a strong financial foundation for the future.

1. Know where you are

You can't manage something effectively if you don't keep track of it. That goes double for your finances. How will you know where you're going if you don't even know where you are?

Fortunately, you don't need a crystal ball. You just need to spend some quality time with your bank statements or your online banking portal. Before you sit down to start planning, it's also helpful to grab your receipts from the past few months, especially if you don't already keep careful track of your spending.

Create a budget

If it seems like you spend your salary as fast as you earn it, creating a budget can help you get your finances on track. A budget shows how much you have coming in each month and how much you have going out each month.

To figure out your total monthly income, add up all the money you earn each month. Don't forget about money you earn from delivering pizza, driving for Uber, selling crafts on Etsy, or walking your neighbor's dog.

Now, it's time to add up your expenses. You may be surprised by how much you're spending and what you're spending it on. To figure out your total expenses, add up all the money you spend each month. Be sure to include streaming subscriptions, health care expenses, groceries, clothing, and impulse purchases. It's also important to include money for your financial goals. For example, if you want to put $200 per month in your emergency fund, you'll need to account for that in your budget.

Finally, compare your income and expenses to make sure you're not overspending every month. Your expenses should be lower than your income. Otherwise, it's difficult to build wealth and plan for emergencies.

Calculate your net worth

When you hear the phrase net worth, you probably think about swimming around in a pool of money like Scrooge McDuck. Understanding your net worth isn't just for people with Elon Musk-style wealth, however.

Even if you hated high-school algebra, you can calculate your own net worth pretty easily. First, add up the value of your assets. In the financial world, an asset is any type of property that can easily be turned into cash.

Outside of cash, funds in checking or savings accounts, property, and automobiles are some examples of personal assets.

Next, you need to add up your liabilities. These are the amounts of money you owe others. Don't forget to include student loans, personal loans, auto loans, credit card balances, and other debts.

Finally, subtract your total liabilities from your total assets. The end result is your net worth. Don't panic if it's negative or it's not as high as you would like it to be.

With good financial planning in your 30s, you can increase your net worth over time and build wealth to sustain you after you retire.

2. Set financial goals for your 30s

Now that you know where you are, you can think about where you're going. Setting financial goals is one of the most important aspects of personal financial planning. Think of your goals as a map that you follow as you plan your financial future.

It's important to set short-term and long-term goals. Short-term goals are generally the goals you want to reach sometime within the next year. Long-term goals take longer to achieve.

Depending on your current situation, a good short-term goal might be to add $500 to your savings account each month if you can swing it. Your long-term goals will include things like saving for retirement and paying off your mortgage, if you have one.

3. Protect what you have

The next step is to plan for emergencies. Everyone has a financial emergency at some point in their lives, so it's best to be prepared. You don't need to worry about if an emergency will happen but rather when it will happen.

Some of the best financial advice for 30-year-olds is to start an emergency fund and purchase the right insurance coverage. These two actions can help you build wealth instead of always trying to recover from your last unexpected expense.

Start an emergency fund

Your emergency fund should have about 3 to 6 months' worth of expenses in it. For example, if you need $3,000 per month to cover your bills, then your emergency fund balance should range from $9,000 to $18,000.

Don't worry if you don't have the full amount right now. Just set a goal to increase your emergency savings by a little bit every month.

Think of your emergency fund as a parachute. If you get laid off, experience a health crisis, or have some other type of financial emergency, your emergency fund can help soften the landing.

Purchase the right insurance coverage

No one likes to think about their own mortality, but it's important to plan for death and disability. It may not be fun, but it's one of the best ways to protect yourself and the people you love.

If you don't already have health insurance, start looking for a plan. Without health insurance, a broken bone or sudden appendicitis can put you thousands of dollars in debt. If your employer doesn't offer insurance, you can use the federal Health Insurance Marketplace or your state exchange to look for coverage.

Now you need to think about life insurance. This type of insurance pays a death benefit to the person you designate as your beneficiary. The proceeds from your life insurance policy can be used to cover mortgage payments, childcare costs, and other expenses after you pass away.

It can also be important to purchase short-term and long-term disability coverage. No matter how careful you are or how much kale you eat, you can develop a serious injury or illness at any time. Disability insurance replaces some of your lost income, ensuring that you can keep paying for housing, food, and other necessities.

Purchasing insurance coverage in your 30s can help you take advantage of lower premiums. It also ensures that you have the right insurance in place before you may need it.

4. Pay off debt

Too much debt makes it difficult to increase your net worth. If you lose your job, monthly debt payments can also eat into your emergency savings faster than you can say "Help!"

Strengthen your financial future by paying off debt as quickly as possible. Start with "bad" debt, or debt that eats into your funds without giving you much value in return. This might be a credit card account or a personal loan you took out to buy a car you don't even drive anymore.

When you pay off debt, you have two main options. The first is to pay the balance with the highest interest rate first. The second is to pay off your debts in order from smallest balance to largest balance.

Mathematically, paying off high-interest debt first can help save you the most money. The faster you pay your balance, the less interest you'll pay.

On the flip side, paying off small balances can provide you an almost-immediate feeling of accomplishment. That good feeling can help you stay motivated as you pay off larger balances. Choose the method that works best for your financial situation.

5. Keep (or start) investing

The market has natural ups and downs, but there's still no better way to build wealth than to invest your money and take advantage of compound interest. If you invest in your 30s, you'll have 30 or more years to grow your net worth before you retire.

If you have young children, your 30s is also a great time to think about how you'll cover their higher education expenses. Not everyone goes to college, but your child may want to attend trade school or take classes to help them start their own business. Now can be the time to plan for these events.

Retirement savings

When it comes to planning for retirement, 401(k) plans and individual retirement accounts (IRAs) are among the most common types of investment accounts. A 401(k) is a type of retirement plan offered by an employer, while an IRA is an account you open on your own.

Both types of investments come in traditional and Roth versions. Traditional accounts are funded with pre-tax dollars, or money that you haven't paid any income tax on yet. Roth accounts are funded by post-tax dollars, or money that's already had income tax taken out of it.

College savings

The 529 College Savings Plan is one of the most popular options for saving for college. It offers federal tax benefits and may offer state tax benefits depending on where you live. They also have higher contribution limits, allowing you to plan ahead for rising college costs.

Other college savings options include a Uniform Transfers to Minors Act (UTMA) account, a Uniform Gifts to Minors Act (UGMA) account, and a Coverdell Education Savings Account. See a financial advisor if you're not sure which type of account is best for your situation.

6. Put an estate plan in place

An estate plan explains how you want your assets distributed after you die. It also spells out who's allowed to make financial and medical decisions if you're unable to make decisions on your own.

Many people assume that they don't need to worry about these things until they're older. Unfortunately, accidents and illnesses have no minimum age requirement. It's better to be prepared than to leave your loved ones scrambling to figure out what to do because you've been in an accident or developed a serious illness.

It may be helpful to meet with an estate planning attorney to set up the following:

• Living will (advanced health care directive)

• Financial power of attorney

• Medical power of attorney

• Last will and testament

7. Meet with a financial advisor

If the thought of doing all these tasks on your own has you breathing into a paper bag, there's some good news. You don't have to do everything on your own. Meet with an experienced financial advisor to ask the following questions:

• What's the best way to reach my financial goals?

• Am I on track for retirement?

• Would it be better to invest in a 401(k) or IRA?

• What are the best investments for someone in their 30s?

• Should I pay off my loans or credit cards first?

The future is bright

As you embark on your financial journey, keep the following in mind:

• Your 30s are a great time to pay off debt and invest.

• It's important to save for emergencies.

• Estate planning isn't something to put off until you're much older.

• An experienced financial advisor can help you get your financial affairs in order.

In a nutshell, careful financial planning in your 30s can go a long way towards helping you build a bright future if you take the time to invest in yourself.