At a Glance

Your 30s are a make-or-break time for your finances. But if you want to make the most of this crucial financial period of your life, it’s important to be aware of financial mistakes to avoid.

Why your 30s are an important decade for your finances

“Generally, in your 30s is where the magic starts to happen in building your net worth (assets minus liabilities),” says Jamie A. Bosse, CFP®, RFC and Lead Financial Planner at

People tend to have a negative net worth in their 20s as they have more student loan debt than assets. “By 30, you should be moving towards or growing a positive net worth by increasing your income, paying down debts and investing in retirement assets (usually 401ks, 403bs, IRAs, etc.) or a combination of all three,” she says.

Plus, you’re likely gaining traction in your career and mastering your trade. Maybe you’ve moved into a management role at work and have increased your income potential. “These higher earnings allow you to start saving more for the future and growing net worth,” she adds.

Where should your net worth be in your 30s?

According to Bosse, there is a rule of thumb to determine your ideal net worth in your 30s. Figuring out where you stand can help you set financial goals. But don’t get discouraged if you’re not quite there yet, the important thing is that you keep growing that net worth. Here is the formula Bosse recommends to help you set goals:

  • (Age x Pre-Tax Income)/10 = Your Ideal Net Worth

“So, if you are 36-years-old with a salary of $75,000 a year, your ideal net worth target is $270,000. Note – this is just a ballpark and varies based on income, and how fast it’s increased over the years. The most important factor is that your net worth is higher than it was last year,” she says.

“Another rule of thumb: By age 30, you should have half of your annual income in retirement savings. So if you are 30 and have a salary of $75,000, you should have at least $37,500 in accounts growing for retirement (401ks, 403bs, IRAs, etc.).”

Financial mistakes to avoid in your 30s

Ready to make the most of your 30s when it comes to your financial future? Here are seven mistakes to be aware of and avoid.

Cashing out old 401ks

“I know it is tempting to cash out an old 401k after you leave a job,” says Corey Noyes.

owner and Financial Advisor at Balanced Capital. Let’s say you switch jobs and you have about $4,000 in your 401k. It could go a long way towards paying off debt, right?

“But if you’re 30 years old, that $4000 will become $64,000 or so by the time you retire simply by leaving it alone,” says Noyes.

Not saving for retirement

On that note, don’t make the mistake of viewing retirement as a far-away concern, says Bosse: “The younger you start saving, the more time the money has to grow, so starting now means you’ll actually have to save less than you would if you started saving in your 40s.”

Also, according to her, not taking advantage of company retirement plans where your employer matches your contributions is leaving free money on the table.

Not converting to Roth IRAs

And speaking of retirement, the type of account you have also matters. “If you have retirement accounts that have been built up on a pre-tax basis, you need to be Roth-converting them. Using the numbers from above, $4000 can grow to $64000 by the time you retire. Do you want to pay taxes on $4,000 or $64,000?” recommends Noyes.

If you’re wondering what he is referring to, a Roth IRA account is a type of individual retirement account to which you contribute money after taxes. There are no tax benefits in the year when you’re making contributions, but your contributions can grow tax-free and be withdrawn tax-free upon retirement. Again, you’d be leaving money on the table by not using a Roth IRA account in your 30s.

Not using HSA accounts

Not using a health savings account (HSA), which lets you set aside money for medical expenses tax-free, is another missed opportunity in your 30s, according to Noyes.

“Medical bills are expensive. If you have an insurance plan that allows for an HSA account, you need to use it. It allows you to save pre-tax dollars, grow them tax-free, and spend them tax-free. Depending on your tax bracket, that represents the equivalent of getting a 12-34% discount on your medical services,” he says.

Having too much debt

Student loan debt is heavy. Combine that with buying a home in your 30s and maybe starting a family, and it tends to be a rather high-expense period of your life.

“Oftentimes daycare expenses cost the same or more than your mortgage, and can cause issues with cash flow” says Bosse. “So it’s important to keep paying down student loan balances, keep credit card debt at bay, and only take out mortgages and car loans that you can afford.”

According to him, your mortgage payment should be no more than 28%-33% of your monthly income, and your overall monthly debt payments (mortgage, student loans, car loans, credit cards, etc.) should be less than 40% of your income. “More liabilities equal more payments and less freedom,” she adds.

Use credit wisely in your 30s knowing that you’ll be needing extra cash flow.

Consider using a debt consolidation loan calculator to help you with a debt payoff strategy.

Being house-poor

You’ll also want to avoid buying a house you can’t afford. “People tend to buy houses at the top of their price range with the most that the lender will approve them for,” says Bosse. Many of them end up “house-poor,” meaning that their house has a lot of value but it also takes up a lot of their income in the form of mortgage and insurance payments, maintenance costs, property taxes, and so on. .

“When the bulk of your income is going into your house, you have less to save for the future and spend on other lifestyle activities like travel.”

Inappropriate life insurance coverage

Finally, Noyes says that a common financial mistake to avoid in your 30s is not having life insurance when you need it or having life insurance when you don’t actually need it. How do you know? It’s simple: Are there people who depend on your income? If so, term life insurance is one of the most important bills you’ll pay each month, says Noyes.

On the other hand, if you don’t have any dependents, save yourself the monthly payment. “I see this all the time. People paying for insurance that nobody needs. You’d have more fun lighting that money on fire,” he adds.