Pimp Your Finances

Two weeks ago, I wrote about the 10 Financial Commandments for Your 20s.  Within a week, it become my most popular post.

Kiplinger’s Starting Out wrote the original list, and they just published the sequel – 10 Financial Commandments for Your 30s.

Just like I did with the last one, I’m going to share their list with my thoughts on each one.  I’m not 30 yet, but its great advice for anyone in their 20s too.

1. Pay off your non-mortgage debt

Carrying debt is expensive, and makes it more likely that a financial setback will turn into a catastrophe.  I’m determined to pay off my credit card debt this year.

As far as other debt goes, I have a car payment (that ends next year), and some federal student loans.  I’m not in any rush to pay off the student loans because the interest is partially deductible. 

2. Kick the debt cycle altogether

The normal spending pattern for big purchases is to use credit, then spend months (or years) paying it off.  In the mean time, interest charges rack up.

Your goal should be to reverse the cycle.  Instead of using loans to pay for big ticket items, save for them in advance.  That way, you are the one making money from interest, and you’ll be able to buy things without going into debt.

3. Get serious about retirement

I agree that you need to be serious about retirement in your 30s, but I think that should start in your 20s, as soon as you get a job.  Time is your best friend.

You have to start doing more serious calculations and planning when you’re in your 30s though.  Time is running out, so you need to realize where you’re going to end up if you don’t take action.

4. Diversify your investments

Again, this applies to any age.  The article suggests a stock market asset allocation strategy, but I don’t think it makes sense to just have a blanket recommendation.  Your asset mix will vary depending on your age and comfort level.

Mike at Oblivious Investor came up with a great visual to show how assets should be distributed.  I like that he includes real estate and an emergency fund in his allocation.

5. Continue to learn

Great advice!  No one will ever reach a point where they have learned everything there is to know.

Make sure to spend some time developing your professional skills (to help your career grow) and financial knowledge (to help your net worth).

6. Protect your assets

Even the best financial plans can be derailed by an accident – if you’re not protected.  You should have all of the following:

• health insurance
• disability insurance
• car insurance
• home owners / renters insurance
• an emergency fund

You need to protect yourself in case you lose the ability to make money.  If not, you could lose everything you’ve worked for.

Again, this is another step that should be taken ASAP – not just in your thirties.

7. Live simply

I couldn’t agree more with this.  The key to happiness lies in loving and appreciating what you have, not in desiring what you don’t.  It’s good for happiness, and great for your wallet too. 

8. Make your will known

If you don’t have a will, your assets may not go where you want, and they may take a very long time to get there.  Don’t let your legacy be marred by laziness.  I want my money to go to my family and good causes.  I don’t want the government deciding what to do with my money.

9. Get a life insurance policy

This isn’t a age-based decision.  If you have a spouse or dependents, you need life insurance.  If you’re single and have kids, you probably don’t need any.

10. Be charitable

A great idea for everyone.  I think it’s important to give back.  I recently made my first donation to charity, and am looking forward to giving more as time goes on.

This was another great list from Kiplinger, though they could all apply to your 20s (or any age, if you haven’t done them yet). 

My favorite tip is to live simply.  It is the foundation that enables a lifetime of happiness and financial success.  If you’re always thinking about what you don’t have, you’ll never be happy, and you’ll never stop spending.

What was your favorite tip?  Do you have any you would add to the list?

(if you liked this, make sure to check out my post on 10 Financial Commandments for Your 20s)