Many people view their 20s as a time of experimentation: A time to make mistakes, take chances, and grow. However, by the time we hit 30, most of us want to start settling in and leveling up. Building wealth is a great way to do just that.
Every few months it seems like some news source or another publishes a thinkpiece about how if you want financial freedom, you need to start investing in your 20s. This can leave a lot of thirty-somethings feeling worried that they’ve already missed the boat, but thankfully that’s not the case. Building wealth in your 30s and securing your future is not only possible, it’s incredibly attainable if you know what steps to take.
This post will walk you through our top four tips on how to start building wealth in your 30s.
The Importance of Building Wealth in Your 30s
We’ll get into the specifics of how to build wealth in your 30s in a moment, but first, let’s discuss why building wealth in your 30s is so important.
Your ultimate wealth-building goals and dream investment future may include terms like “financial freedom” and “early retirement.” Those goals are excellent to strive for, but wealth-building is also important for reasons that are less directly associated with the wealth itself.
Building wealth in your 30s is vital for setting you up for success in the future and for setting you up for success today. Financial assets not tied to your regular income will help you prepare for financial emergencies like sudden health crises or unexpected home or car repairs. You will also be able to afford to take professional risks if needed, resulting in larger financial gains in the future.
Tribevest helps friends and family build wealth with group investing every day, so we’ve been able to identify patterns of what works best. Let’s dive into our top four tips for building wealth in your 30s.
1. Make a Strategy For Existing Debt
Take another look at the headline of this section. There’s a reason it says “make a strategy for” and not “pay off.” Of course, paying down existing debts should be a part of your strategy, but you’ll want to consider more than just your debt balance when you’re making your debt-paying game plan.
A few other factors to consider:
- Good Debt vs. Bad Debt:
Any debt that has the potential to increase your net worth in the long term is considered “good debt.” Student loans and your mortgage are both examples of good debt. Bad debt refers to debts incurred by buying consumables. Credit card debt is an example of bad debt. Bad debt is more urgent than good debt.
- Interest Rate:
How high is the interest rate on your debt? A loan with an interest rate of 12% is more urgent than a loan with an interest rate of 3%.
- Opportunity Cost:
What investment opportunities will you miss out on by dedicating your capital to paying down your debt? The cost may be worth it, but ensure you’re considering that cost before allocating all your spare funds to debt payments.
For example, imagine you have $10K in student loan debt with a 3% interest rate. You have $12K in the bank, and your friend group has the chance to invest in a real estate opportunity with a $10K buy-in. Should you put your cash toward the debt or the new opportunity?
Paying off debt is never a bad thing, to be clear. However, suppose you have the opportunity to invest in an opportunity with a greater return potential than the interest rate will cost you by holding onto that debt a bit longer. In that case, that may be the best immediate path forward.
Of course, strategizing and paying off debt is always easier said than done. If you have a number of loans and are overwhelmed about where to start, you may want to consider debt repayment methods like Dave Ramsey’s debt snowball method.
Essentially, the debt snowball works by attacking the smallest debts first, then rolling the current payment plus the minimum payment you were attaching to each debt into the next loan… then the next, and the next.
We are fans of the debt snowball method because it makes it easy to roll your final snowball into asset investment. Imagine you’ve been paying $600 each month toward your final debt for over a year. Once it’s finally paid off, you could use that $600 per month to fund your lifestyle… or you could use it to begin buying wealth-building assets.
For us, the choice is easy.
2. Contribute to Retirement Accounts
“Saving for retirement” is rapidly becoming an outdated idea. However, that doesn’t mean you can’t leverage your retirement accounts to help you build wealth and make your way toward financial freedom.
Investing in stocks and bonds is an essential puzzle piece of building sustainable wealth. Using a 401K or IRA to make those investments has many benefits.
The biggest benefit of contributing to a 401K or IRA is that the contributions are pre-tax. Essentially, this means that you can hang onto more of your paycheck in the long run if you contribute a higher percentage of each check to your retirement account.
Many employers provide a matching program, matching each employee’s retirement account contributions up to a certain percentage. You should always max out your employer’s matching program, as this doubles your own wealth-building efforts. For example, if your employer matches contributions up to 5%, you should be contributing 5%, resulting in 10% of your pay rate going into that retirement account each pay period.
If you haven’t contributed to your retirement account yet, now is the time to start. The earlier you begin contributing funds, the more time your funds gain compound interest and grow. Already contributing? Great! It might be time to step those contributions up a notch. Even increasing contributions by 1% can make a significant difference in the long run.
3. Buy Real Assets
The last section talked about how stocks and bonds are an essential part of any wealth-building strategy. Many people run into the pitfall when trying to build wealth in their 30s by devoting 100% of their investable capital into public assets. If you’re looking to get serious about building wealth, you need to buy real assets.
When we say you need to buy real assets, we don’t mean your primary residence. If you own your home, that’s wonderful, but it’s not the kind of asset we’re talking about. We also don’t mean any assets that depreciate over time, like cars or boats. We’re talking about appreciable, alternative investments. But what are alternative investments? Let’s go over a few of the types of assets you should be pursuing to build wealth in your 30s.
If you want to build wealth, you’re going to need multiple streams of income. You probably don’t want to work multiple full-time jobs, so why not invest in assets that can produce that additional cash flow for you?
One incredible cash-flowing investment option is real estate. I know we just said your primary residence doesn’t count as an asset: But other homes you purchase as investment opportunities definitely count!
You can get cash flow from real estate investments in many ways. For example, you can serve as a landlord for a long-term rental property. If you’re handy with tools and don’t mind a bigger time commitment, you can flip fixer-upper properties and sell them for a profit. Alternately, you could purchase a small property in a tourist-heavy area and list it as a short-term rental on sites like Airbnb or VRBO. There’s no shortage of possibilities!
By the time you reach your 30s, you’ve probably already heard about the benefits of investing in start-ups. You might even know someone who made a hefty bit of cash doing just that. If you haven’t yet dipped your toes into the waters of start-up investment, now is the time.
Why invest in start-ups rather than pouring that capital into the stock market? Simple: The opportunity for explosive ROI.
Even if the start-up you choose to invest in isn’t the next Amazon, investing a small amount of capital in a business that ends up finding moderate success can have massive returns for you down the road.
How can you invest in a start-up? There are a few different methods you can use:
- Be An Angel Investor: This option is best if you know the founder of a start-up business you feel passionate about supporting. You can engage with a start-up in the form of a convertible note, offering funding in return for equity in the company.
- Explore Crowdfunding: Don’t know anyone starting a business you want to invest in? Explore crowdfunding instead. You can invest through sites like SeedInvest or WeFunder. Crowdfunding also has the advantage of a low entry threshold, so if you don’t have a ton of investable capital but still want to invest in a start-up, this is a great option.
- Work With A Venture Capital Fund: To work with a Venture Capital (VC) fund, you need to be an accredited investor. You can invest in start-ups through a VC fund if you have enough capital to reach their minimum investment qualification. This qualification depends on the fund and the investment.
The incredible thing about investing in real assets is that, after a time, the wealth-building mechanism you’ve built starts to sustain itself.
“It’s like planting a tree. You water it for years, and then one day it doesn’t need you anymore. Its roots are implanted deep enough. Then the tree provides shade for your enjoyment.”
4. Level Up Your Investments with a Tribe
By this point in the post, you may find yourself falling into one of two camps:
- “I have already done all of these things! There’s no way I can build more wealth right now.”
- “I can’t afford to do any of these things! It’s hopeless.”
The good news is, there’s one simple solution for the people in both situations: Investing as a group.
Group investing refers to the practice of pooling capital with other investors. You can use a few different methods, like crowdfund-style investing, but our favorite method (of course) is to invest as a group with friends and family.
Pooling capital with friends or family members can help you reach asset classes you couldn’t afford on your own. For example, suppose you’ve always wanted to invest in income property but didn’t have the cash for a down payment. In that case, you can team up with your siblings and purchase a property together, sharing the profits—and the experience—as a family.
You can also diversify your portfolio more easily when investing as a group. Instead of going all-in on one big investment alone, you can pursue several big investments with your group simultaneously, spreading your risk and expanding your portfolio simultaneously.
Building Wealth in Your 30s Doesn’t Have To Be Stressful
Building wealth in your 30s can feel overwhelming or even impossible without knowing the right steps to take. However, following these four expert tips should give you the tools you need to make building wealth not only possible but fun and rewarding.
Working to knock down existing debts, dedicating more attention to your retirement accounts, and buying real assets will lay the groundwork. Diversifying your portfolio with the help of a group will give you the opportunity to take your investing game to the next level and start building significant wealth.
Tribevest’s one-of-a-kind platform allows you and your friends to pool your resources and start building wealth together without damaging your relationships. We’ll help you with every step of the way from aligning your tribe, to forming and filing your LLC, to pooling your resources and pulling the trigger on your first investment together. Get started and form your Tribe today!