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© Liz Pulliam
Weston, 2007, MSN, www.msn.com
The 30s are a
real make-or-break decade for many people.
Your income is
rising, but so are your expenses and debts. Most families in this age
bracket have children, who, wonderful though they are, tend to boost living
costs.
Homeownership
brings risks and rewards as well. The majority of people 30 to 39 own their
homes, and homeownership tends to build net worth. But all the attendant
costs, including mortgages, property taxes, insurance, maintenance and
repairs, can be budget busters if you're not careful.
There's a reason
the average age of a person filing for bankruptcy was 38. It's easy to go
off the financial rails in this decade. Consider:
-
Debt is nearly
ubiquitous. Nine out of 10 people in their 30s owe money, according to the
Federal Reserve's latest Survey of Consumer Finances, compared with 76% of
those in their 20s. And the amounts are a lot higher. The median debt
owed, including mortgages, was $86,000, more than four times the debt
level for people in their 20s.
-
Fewer have
student loans, but the balances are higher. Only one out of five thirty-somethings
still owe money for school, but the median balance is more than $13,000,
compared with $9,200 for those in their 20s. This reflects the fact that
the folks who didn't owe much were able to pay off their loans within a
few years of graduation. Those still stuck with payments in their 30s tend
to be the ones who had borrowed a lot.
-
More people
carry credit card balances. About 55% of people in their 30s fail to pay
off their credit cards in full every month, and the median balance carried
is $2,000. By contrast, more than half of people in their 20s pay off
their balances in full, and the median balance is $1,400.
-
More people
have serious debt problems. People in their 30s are slightly more likely
to be 60 days late on a bill (11.8% compared with 10% in their 20s) and
more than twice as likely to be $10,000 or more in debt on credit cards
(8.4% compared with 3.6%).
Money in your 30s
What you have
Amount
Median
net worth $44,200
Median net worth of top 25%
$128,100
Median net worth of top 10%
$317,800
Median income
$48,263
Life expectancy*
70-72.9
Children in household
67.6%
Homeownership
60.3%
Median value of home
$150,000
Own a car or cars
88.10%
Median value of vehicle(s)
$13,000
What you
owe
Households with debt
87.0%
Median total debt
$86,000
% carrying credit card debt
55.00%
Median balance
$2,000
% carrying student loans
21.2%
Median amount owed
$13,000
% carrying installment loans
61.4%
Median amount owed
$12,000
% with a mortgage
55.9%
Median amount owed
$112,000
Households on the
edge
Negative net worth
11.1%
60 days late on a bill
11.8%
Owe $10,000 or more on credit cards 8.4%
No health insurance
21.4%
Your
future
Households with a pension
20.6%
401(k) or IRA
53.4%
Median value of accounts
$17,000
Source: Federal
Reserve's 2004 Survey of Consumer Reports
*Life expectancy
from National Center for Health Statistics, 2006
The good news is
that you're more likely to have access to a workplace retirement plan, like
a 401(k), and to be using it to save.
Here are some of
the things to keep in mind while charting your financial life in your 30s:
-
Corral your
expenses. It's easy to let your living costs creep up on you, but if you
want to get ahead financially, you often need to make some hard choices
about your spending.
-
Pay off those
credit cards. Carrying a credit card balance is bad for so many reasons:
You pay unnecessary interest on your purchases, you're vulnerable to all
kinds of credit card company schemes. And you're cutting yourself off from
a source of funds in an emergency.
Speaking of
which:
-
Build an
emergency fund. A cushion of cash can protect you in case of job loss,
illness, accident or other setback. Aim for an amount equal to one week's
pay at first; try to build from there.
-
Watch your
other debt. Make sure you can really afford the loans and other debt you
take on. You'd be smart to limit mortgage debt payments to no more than
25% of your gross income and to be extremely cautious about auto debt.
-
Continue saving
for retirement. With all the other demands on your income, you may be
tempted to suspend or reduce your retirement savings. Don't give in to
temptation. Your contributions to retirement need to come first and to
continue no matter what if you want to have a comfortable old age.
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