10 Financial Commandments for Your 30s

Saw this list this morning on MSN. Pretty good list. I think we have accomplished all of these, which is a good thing because I’m in the final months of my 30s!!!!!!

Here’s the list along with my thoughts on each point. You can read the original article here:

1. Pay off your nonmortgage debt.

I totally, 100% agree with this. You should have no debt except for a mortgage and possibly a (reasonable) car note.

2. Kick the debt cycle altogether.

I like what the article’s author said here so I’ll just repost it: What good is it to pay off your loans only to take out another one and rack up more debt? An easy way to save for big-ticket items –and avoid going back into debt — is to put money you would have used for monthly debt payments and interest charges into a savings account. For instance, after you make that final $300-a-month student-loan payment, keep making an equal payment to yourself. After one year, you’ll have $3,600 saved. (See “Your 5-minute guide to budgeting” for help allocating your money.)

This is something my wife and I have started doing. We had a 401(k) loan out once and when it paid off, I upped our contribution to close what the loan payment was. The cool thing is that I was actually able to increase our contribution by MORE than the loan payment because 401(k) contributions are payed before tax while 401(k) loan repayments are not. I only wish we would have done this when we payed off our Rendezvous nearly two years ago. We would have nearly $12,000 in a car fund by now had I saved our car note after the car was paid off.

I also use our high-yield savings account (well, it “used” to be high-yield…it’s not so much right now) and pay our property tax into that account so that we have the money available when the tax comes due.

3. Get serious about retirement.

The 30s is when we saw amazing growth in our 401(k) balance. Unfortunately, the market has taken back much of those gains but over the long-run things should be better.

4. Diversify your investments.

We are diversified amoung equities. We don’t have any bonds in our portfolio yet.

5. Continue to learn.

This is one area where I have been lax. I have considered going back to get an accounting degree and becoming a CPA. That’s the degree I probably should have gotten in the first place.

I do at least continue to read books so I’m not completely forsaking educational endeavors.

6. Protect your assets.

As our budget has allowed, I have upped our insurance coverages where I thought it was important. I also upped our deductibles—something that can be done if you have an emergency fund—in order to keep the costs down.

7. Live simply.

I’m thankful that my wife and I live simply. I was looking at our budget the other day and noticed that our mortgage payment, property taxes, and homeowner’s insurance added together are less than 17% of our net income. Yes, we live in an affordable area and make decent money, which makes a huge difference. Lots of people don’t have that advantage. That said, we still made the decision to buy a house that we could afford. It WAS NOT our dreamhouse and it took us EIGHT YEARS before we did any major renovations to the house. And, we STILL don’t have our master suite the way we would like it. Bottom line: unless you make lots of money, you can’t have everything all at once. There’s nothing wrong with waiting until you can afford something.

8. Make your will known.

This is an area my wife and I are going to work on this year. We haven’t done enough in this area.

9. Get a life . . . insurance policy.

Check with your employer to see if they offer life insurance. BE AWARE that if you leave your employer (or are fired), you will most likely lose your life insurance. That’s why it is good to also have an insurance policy that’s not connected to a job. I’d suggest a nice long-term term policy.

10. Be charitable.

My wife and I tithe but could also do better in giving. We do little things like give to the United Way and a couple of religious charities that we agree with but that’s about it. I also am too stingy with my time.

I thought this was a good list. I feel a little better at what my wife and I accomplished in our 30s.

17 thoughts on “10 Financial Commandments for Your 30s”

  1. Very good post. I totally agree, and would like to say that as a professional, I see a lot of elderly people every day. I help them to plan the rest of their lives financially. You don’t fully realize the importance of time until there is very little of it left. Every man’s greatest asset is his unexpired years of productive life. Let me know if I can be of any assistance.

  2. >1. Pay off your nonmortgage debt.

    This one seems a bit too generic to be really good idea because it doesn’t consider the interest rates. I think they are generalizing because mortgage interest is tax deductable, so it lowers the effective interest rate. However, student loan interest is tax deductable too!

    If you had money to pay off debt, why not pay off the highest effective interest? Also, paying off low interest rate debt isn’t a great return on your money- why not invest it instead?

    Finally, I fear we are in for a high inflation in the future due to all the stimulus spending- if that is the case why not wait to pay off low interest debts with less valuable dollars?

    -Rick Francis

  3. Sounds like you’re doing pretty well for yourself. Not bad for your first forty years of life 😉 You actually inspired me to take a look at the ten commandments for us twenty-year-olds, so don’t be surprised if you end up get a pingback from this.

  4. This list sounds like it could have been developed by Dave Ramsay. It is very similar to his ideas.

  5. Saving is like dieting in my opinion. I don’t think you hit a number and stop. A healthy dieter knows that it’s a lifestyle change. Not a temporary stop to “normal activities.” Same with saving. You have to practice healthy habits.

  6. Agree with Rick Francis above – pay off higher interest or variable interest debt. I view the decision of repay or keep a long-term reasonably low fixed interest debt as an investment decision: can you get more on the low risk investments? if you cannot repay the debt in full with one lump sum, do you have enough in savings that you’d be able to make payments even if you are unemployed for 2 years (since making extra payments doesn’t reduce the monthly obligations)? do you believe in future inflation/high interest rates?

    Regarding diversification: it should be more than just stocks and bonds. Bonds and stocks don’t always move in opposite direction; often they behave similarly, especially if you are buying bond funds and not individual bonds where you have an option of waiting till maturity and ignoring bond market fluctuations. I would include cash and alternative investments like commodities as well.

  7. Also – regarding 9. It applies to you if you have children/spouse. For those who are single, it’s a waste of money.

  8. With only 17% going to those living expenses you’ll easily be able to afford that master suite before you are too old to enjoy it – LOL! My husband and I used to spend 14% on housing and associated costs and we loved it. It was a great way to start out our lives together. It has allowed us to do a lot of things our peers haven’t – including moving into a nicer and bigger (albeit more expensive) home.

  9. the commandments sound pretty, applicable to less developed countries, no one can survive without borrowing; leveraging your capital assets requires you to pay back the debt. congrats the author.

  10. You are giving a list of ‘must do’s’ to save life for future. I have found a missing link in this and thought I will point out the same to your consideration.

    A necessary requirement of having an Emergency Fund is one of the most required financial planning steps due to the volatile economic changes and less job security.

    Thanks for the best article,


  11. JLP,

    That’s a worthy list for anyone. I’m especially partial to Continue to Learn. When you have that mindset it’ll enrich your life tremendously. You can get better, more efficient, doing the same old stuff and also get to know new things of interest and then expand on them. There is always room for improvement.

  12. Ah, the magical CPA. Bad time of year for me to recommend that one 🙂

    CFP is a great designation to pursue as well. I really enjoyed taking the classes but just never quite got around to taking the exam (wasn’t ready to have the work requirement hours it demands.)

    I think my accounting education has served me better personally (rather than professionally) as I feel we’ve always had our “ducks in order” b/c of my educational background (and God-given tendencies/affinities.) Working part-time now is a double-edged sword. Flexible, yes, however no benefits and we could really use the tax-deferred savings for me! But as an accountant, you should always be able to find work, it just may not be desirable 🙂

    Get going on the will, JLP. That was the best money we ever spent (and an estate plan will be needed to shelter your assets from the estate tax whose rates will be creeping up again…) With a competent tax attorney and a good handle on the details of your assets and life insurance, it should be a quick process.

  13. JLP, there’s nothing wrong with bonds and/or CDs. At your age, a 40% allocation to bonds (including CDs, which are merely nominal bonds) might be prudent for an AA.

    Just my $.02

    “Age in bonds”. Not a bad rule-of-thumb.


  14. One strategy I see no mention of in your blog for tax deferred or tax free savings is the growing use of truly Self Directed IRA’s. Most young people still don’t know that as far as IRA’s are concerned, the IRS regulations only exclude investments in Collectibles like art and fine wine, life insurance contracts and shares in an S Corp from an IRA account. The traditional investment community limits the investments in their IRA’s to the products they earn a commission on and the investments are all out of your control. For traditional Wall Street plans, most of the time, this rules out investments in anything other than stocks, bonds and insurance in various forms. The plan documents approved by the IRS for a truly Self Directed IRA include the options for investments in real estate of all kinds, precious metals, tax liens and both secured and unsecured notes and at least 40 other asset classes. These types of assets can be an excellent inflation hedge for young people, with time for their investments to grow. One place you can get oodles of free information on this type of IRA is at http://www.cencal.entrustcalifornia.com. You should do a post to your readers and make them aware of this option!

  15. My two cents: unless you have some professional goal in mind, there are probably better things to do than become a CPA. I don’t know what would be a better alternative, but I’m about to become a CPA, and the vast majority of what I’ve learned won’t do squat for my personal finances.
    The exception would be if you plan on doing hardcore research when investing. In that case, it would definitely help to be a CPA so that you can actually understand the 10-Ks.
    But even though I actually understand those massive volumes, I still don’t think poring over those ridiculous documents is the best use of my time.

  16. Very good post and comments. Have you considered putting an area on your site where readers could post financial questions and visitors could provide their input? This would be pretty valuable as I’m in my 30’s and typically have questions about whether I should do X with my money versus Y or Z.

    Lance, thanks for your posting on self-directed IRA’s – I’m going to investigate this and would like to read more from this site as well.

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