As the famous expression goes “life really begins
at 30”, individuals who are about to hit their 30 are approaching that time in
their life where they may be facing huge financial milestones such as marriage,
children, and buying a new home. By the time you reach 30, your attitude
towards money should have matured, tempered by past mistakes and informed by
new responsibilities.
You find yourself no longer able to get away with
being financially clueless anymore. Here are 10 financial milestones that every
30-year-olds should have achieved:
1.
Financially independent
By the age of 30, you should be financially
independent of your parents, settled well into your career and able to support
yourself financially. Your job is your major financial asset and the one that
generates the most income for you. The most important thing is that you have
started establishing yourself.
2. Good
credit history
Credit is easy to get and easy to abuse. This can
be achieved by living within your means, and not depending solely on credit. A
solid credit history on the Central Credit Reference Information System (CCRIS) will
not only help you with getting a loan for big purchases like a home, but also
show that you pay your bills on time and do not live at the limit of your
plastics.
3.
Kick-starting your retirement savings
Ideally, every 25-year-old should be saving
one-third of their salary every month to save enough for their retirement nest.
However, if you find yourself without a retirement plan at 30, it is never too
late to start. First, determine how much you need to retire comfortably, taking
inflation into account.
You should have two-third of your last drawn income
every month after retirement if you don’t want to downgrade your lifestyle
post-employment. Start saving now and increase your contributions when your
income rises or when you have achieved more of your short-term financial goals.
4.
Becoming an investor
Your idea of saving and investing should be beyond
a basic savings account. Although you may have not accumulated wealth for
rather big investments, you could very well invest in a unit trust or buy
stocks with just RM1,000.
As time and circumstances change, your financial
needs might change as well. Therefore, it is important for you to learn to
rebalance and readjust the allocation of your investments as and when necessary to
accommodate the changes in your financial needs and attitude towards investment
risks.
5.
Establish emergency funds
The general rule is to have enough emergency fund
stashed to cover six to 12 months of your monthly expenses. This fund will be
useful in covering up monthly expenses and debt repayments in case of
unforeseen circumstances such as loss of job. If you are earning RM4,000 a
month, then you should set a target to have a minimum of RM24,000 in your
emergency fund.
6.
Adequately insured
Part of being a responsible adult is financially
protecting yourself, and that includes obtaining the suitable insurance that
you will need – life insurance, medical or health insurance, and personal
accident insurance.
7.
Having a budget
Having a budget help you to keep your strategy in mind in order to
achieve your financial goals. Be it getting married in two years or buying your
first home next year, without a clear plan, your chances of achieving your
goals is slim.
Financially, we cannot live as if today was our
last day. We have to decide between what we spend today and what we spend in
the future. Finding the correct balance is an important first step toward
achieving financial security.
8. Know
your net worth
Everyone has a net worth and you need to be aware
of your because it is the easiest way to get a big picture perspective on your
finances. Your net worth is the total of your assets (bank account balances,
savings, investments, etc.) minus your debts (loans, mortgage, credit card
debt, etc.).
At the age of 30, your net worth should be a
positive number – at a growing capacity.
9.
Understand personal income tax
Understanding what tax category you are under and what are the tax reliefs, rebates andexemptions that you can entitled to, means more money in
your pocket every year. Make sure you are claiming all other available
deductions in a way that ensures you pay the least amount of taxes possible.
For example, the government offers a tax relief of
up to RM3,000 per annum for individual contributions made to the Private
Retirement Scheme (PRS). What better way to save for your
retirement?
10.
Buying a property
Even if you have not actually realised this
milestone yet, you should be aware of the processes and what you need to do in
order to successfully buy one. There are various factors you need to consider
other than your affordability when buying your first property.
If you are in deep credit card debt, have no life
insurance and saving for retirement seems like a fantasy, you still have three
decades of working life ahead to sort yourself out. It is never too late to
start.
Your 30s should be when you make a big financial
push. Understanding things like insurance, retirement plans and mortgages is
important since it’s all on your shoulders now.
Work extra hard and achieve all the above
milestones before you turn 40, because being 40 brings along a whole new set of
milestones you need to achieve!
The
three things you need to understand to get a grip on your finances – debts, contingency and retirement.
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