• American Financial Partner

5 Key Steps for Building Wealth in Your 30s

Updated: Sep 9, 2021

Building wealth in your 30s should be a continuation of building wealth in your 20s. There are a number of steps to building wealth that you have already taken, and there are more steps to take now. Improving your net worth means continuing to increase assets and decrease debt. In order to do so, you will need to keep earning more income, cutting expenses, paying off debt, saving and investing.

In this article, we will look at the five key steps ways to building wealth in your 30s. By the end, you should be well on your way to building your ideal lifestyle.

How You Should Already Be Building Wealth

There are a number of steps to building wealth in your 30s that you should have already started in your 20s. So, make absolutely sure you are doing the following:

  • Fully fund your emergency fund.

  • Contribute to your 401(k).

  • Keep your debt low and pay it down fast.

  • Increase your salary.

  • Open an IRA or Roth IRA.

  • Open a taxable brokerage account.

If you have lagged behind on these important steps, you should make sure to start doing them now. This way you won’t have too much catching up to do later. In the meantime, let’s take a look at the next steps you should be taking to keep building wealth.

Building wealth in your 30s should be a continuation of building wealth in your 20s. There are a number of steps to building wealth that you have already taken, and there are more steps to take now.

Step 1. Adjust Your Budget

Let’s face the facts: You’re getting older and more established now. The budget that worked for building wealth in your 20s most likely won’t work for building wealth in your 30s. So, you will need to adjust your budget accordingly.

For starters, your housing situation has most likely changed. In your early 20s, you may have found it perfectly acceptable to live with a roommate. Now, you may live with your spouse and/or your kids.

If you have changed from renting a spare bedroom to owning a house, you will need to adjust your housing budget accordingly. With that being said, I strongly encourage you to keep your housing budget under 25% of your net income

I'm sorry to say that may mean not keeping up with the Jones' or splurging on that McMansion. Of course, it’s your right to spend as you wish, but doing that will ultimately decrease your wealth rather than build it. Investing in real estate is good; Investing in stocks is better.

You hopefully make far more money now than you did in your 20s. As you account for this increased income, try to prevent lifestyle creep. Generally, as people’s income increases, so does their spending. You’ll want to keep this to a minimum as you keep building wealth in your 30s.

Step 2. Drive Modest Vehicles

You’ve probably heard that cars are a terrible investment. As a matter of fact, they aren’t investments at all. Cars are an expense, and are usually financed through debt.

The average American family spends almost $800 per month – or $9,000 per year – on their cars. That much money could be another mortgage payment!

When building wealth in your 30s, try to keep your auto costs down as much as possible.

There are several ways you can do this. For starters, you should never buy a brand-new car. A new car loses value as soon as you drive it off the lot. You can avoid this immediate loss by buying a used model that’s a year old or more.

Another way to save money is to buy a dependable model that gets good gas mileage. This is especially important when oil prices are high and gas is expensive.

Finally, consider a less luxurious car than you can afford. Sure, you look stylish in that Mercedes or BMW, but is it really helping you build wealth… or is it just a drag on your money?

I drive a Chevy HHR and I’m perfectly comfortable with it. It is completely paid for, keeps my maintenance costs low, looks good to me, and is dependable and reliable. I also bought it used, which makes the deal even sweeter and has helped me continue to build wealth well into my 30s.

Step 3. Keep Your Investments Diversified (Inexpensively)

Keeping your investments diversified remains important while building wealth in your 30s (and beyond). It is the best way to improve your returns without taking on undue risk.

While you’re in your 30s, I recommend staying mostly invested in stocks. Keeping a small amount of money in bonds and a bit in a money market fund or cash equivalent is fine.

But in the long run, stocks are the most profitable investment. Plus, you still have many years until you’ll need this money to fund your retirement.

Even if the stock market collapses along the way, there is plenty of time for the prices to come roaring back and earn you big returns.

To mitigate your risk exposure, you need to keep a diversified investment portfolio which includes the following:

  • Large cap

  • Mid cap

  • Small cap

  • Growth

  • Dividend

  • Domestic

  • International.

Furthermore, you can diversify your portfolio by using a combination of mutual funds, ETFs and REITs. These will help you to keep building your wealth while minimizing the chances that you lose most of your money.

Step 4. Take On Some Risk

When you’re building wealth in your 30s it is the perfect time to take on plenty of risk. That’s because you have a long time frame to protect yourself from potential big losses.

For starters, you’ll want most of your portfolio to be in stocks rather than bonds and cash. Plus there are other ways you can add some risk – and therefore more potential reward – to your portfolio.

Real Estate

Investing in real estate has multiple options:

  • Renting out your home (or part of your home) to travelers via rental websites like Vrbo orAirbnb

  • Purchasing a property to rent out or fix up and sell

  • Real estate crowdfunding sites like Fundrise let multiple investors pool their money to invest in real estate that would otherwise be unaffordable. You may be able to invest with a few hundred or few thousand dollars, though the type of investments you are eligible to make depends on your income.

Equity Crowdfunding

Similar to real estate crowdfunding, equity crowdfunding allows investors to pool their money and invest in companies that are looking to raise capital. Investors can put in as little as a few hundred dollars in exchange for equity in the business. Your shares can be sold at a later date — unless the company fails. “Essentially, Act legislation allows anyone to be a mini angel investor and support the startups that they believe in,” said Brian Belley, founder of CrowdWise. “Startups as an asset class are less correlated with the public markets. Thus, investing a small portion of one's portfolio in venture assets allows one to diversify holdings with the potential to boost returns with non-correlated assets.”

However, this comes with the same risks as investing in individual stocks.

P2P Lending

Peer-to-peer lending lets individuals supply loans to other individuals, bypassing traditional lenders like banks. With websites that facilitate P2P lending, investors contribute funds that are pooled with other investors’ contributions and disbursed in the form of loans. Over time, the investor receives interest as the loan is paid back, though there is always the risk of the borrower defaulting.

Still, you’ll want to keep the majority of your investment money in the tried and true: great companies that are likely to remain great companies well into the future. Whether these investments are tech stocks, biotech or consumer staples companies, they have a very good shot of outperforming the broader market over time.

Step 5. Stay the Course in Building Wealth

On the highway to building wealth in your 30s, you’ll have many temptations to take the nearest exit. There will be tremendous pressure to keep up with the Jones'. You will experience the temptation to give in to lifestyle creep. The list of wants, needs and useless stuff to buy is never exhausted.

Nevertheless, hold on and be strong in your path! You’ve worked hard to build your wealth. You’ve stocked that emergency fund, avoided the fancy cars, and kept your housing costs low.

Now is not the time to bow to the pressures to spend, spend and spend some more. Building wealth is not glamorous. In many ways, it’s the exact opposite. In the end, however, you will be living the life you have always dreamed of and have peace of mind as well.

One way to continue to inspire yourself to build wealth is to continue learning. Education is one of the best investments in yourself. Look to books, videos, podcasts and more to keep learning about personal finance and investing.

Continuing Action

Building wealth is no great mystery. It’s more about intention, persistence, grit, and most of all, making good choices when it comes to your money and lifestyle.

If you keep building wealth in your 30s, you will be on your way to achieving the rich lifestyle you want and deserve. Following the steps laid out in this article will keep you on the surefire road to success.

Read Next: 5 Key Steps to Building Wealth in Your 40s

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