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If you're in your 30s, you've probably realized two things by now. One, instant Ramen has its consequences. Two, it's time to get serious about building wealth. But even if your student loan balance is still pretty scary, getting control of your money doesn't have to be. It's totally doable, and you're about to get a step-by-step guide to building wealth in your 30s, so that by the time you're 40 you're sitting on top of a sizable nest egg, Scrooge McDuck style.
The first step toward wealth building in your 30s is to stop using debt. Stop it. If you have consumer debt, whether it's credit cards, car loans, or what you still owe Clara on that 40 o matcha cream Stanley quencher, drop it like a hot potato, man. Because the more debt you have, the more you're playing catch-up instead of actively getting ahead. I mean, paying crazy interest on a big dumb cup you bought last year sounds like a big dumb decision, especially considering you left it at Ashley's birthday get-together four months ago and she swears she can't find it. I swear I look everywhere. I don't sound like that.
Bottom line: if you're in your 30s and you still have non-mortgage debt, you've been stuck in the cycle for too long. Some of you have had student loans for so long they're starting to get moldy. You can't throw them away, you've got to pay them. But I hear stories every day of people who just decided they were done with debt, got to work paying it off, and it typically took them less than 24 months to do it.
When I was getting out of debt, I used the debt snowball method, and that's what I personally recommend for anyone trying to get out of debt. Here's how it works: you list out your debts from smallest to largest balance, and you throw as much as you can at the smallest debt while making minimum payments on the rest. Once you knock out that little debt, you free up a payment, and you can roll that payment plus the extra you were throwing onto the next debt. As the snowball rolls, you gain momentum and you get out of debt so fast. And before you comment, "Well, Georgia, it makes more mathematical sense to pay off the highest interest first," listen: debt is not a math problem, Brainiac. It's a behavior problem. What the debt snowball does is target your psychology and your behavior to get you debt-free faster.
The next step is not the most exciting part of wealth building, but it's crucial, kind of like brushing your teeth. Few people are thrilled by it, but you're happy to do it to avoid gingivitis, gum disease, and tooth decay. I'm talking about budgeting. Listen, if you want to take control of your money, you can't manage what you don't measure. Dang, that was good. That's how Tony Robbins feels every single day of his life. Your identity is defined by who you believe you are and who you believe you are not. You see, tracking your expenses with a budget shows you exactly where your money's going, so you can stop wondering where it all went. When you know you're spending less than you make, you finally have this beautiful thing called margin. And you don't need to be an Excel prodigy or an accounting savant to do a budget. I personally use a budgeting app called EveryDollar that helps keep it simple, using a zero-based budget system where every dollar I earn has a job: income minus expenses equals zero. I'm going to drop a link down below in the description if you want to go check it out for free.
The next step is to get yourself a financial parachute. I'm talking about an emergency fund, because if you're old enough to have back pain from just sleeping, not that I would know anything about that, and you're old enough to know that sometimes in life it rains, and sometimes when it rains it catastrophically floods, leaving waterlogged couch cushions floating around your apartment at best and wiping out all of humanity at worst. Shout out to my man Noah, he saw it coming. Haters doubted. And let's face it, you're also old enough that Mommy and Daddy probably shouldn't be bailing you out anymore like they did in your 20s. But good news for you: an emergency fund can and will bail you out. You should aim to have three to six months of expenses saved for emergencies, and you want to keep it liquid, meaning you can access it fast. Where should you store it? I recommend keeping it in a high-yield savings account, like the one from Laurel Road, a sponsor of today's episode. How's that for a transition? With a high-yield savings account from Laurel Road, you can earn way more interest than a traditional savings account, because they offer rates over 4% without any bogus maintenance fees. But wait, there's more: no minimum balance is required to open an account, and your deposits are FDIC insured, so you can rest easy. Go make the most of your savings by going to laurelroad.com/Jorge or clicking the link in the description to get started.
While I'm recommending awesome things, let's throw saving on your cell phone plan into the mix. Lucky for you, my friends at T-Mobile are committed to helping people save big bucks over the big-name service providers. Plus, they offer more data for prices as low as $5, or just $25 for unlimited everything. Did I mention their plans are flexible, meaning no contracts? You pretend to read the fine print, just hoping everything works out. So go check them out at t-mobile.com/George, and you'll get an extra five bucks off the unlimited data plan for your first month of service, or you can always click the link in the description below.
Okay, back to being 30 and taking steps. The next step is something that, if you're out of debt and have an emergency fund, you should have started doing yesterday: investing for your future. By future, I mean the 65-year-old version of yourself that's risking it all to go no-hands on the Dumbo ride with your grandkids at Disney World. And yes, even though retirement might still be decades away, you've got to start investing for it ASAP. For the record, I'm not talking Wolf of Wall Street investing here. I'm talking about investing in old tried-and-true 401(k)s or Roth IRAs. Fun fact for you: the boring old 401(k) is the number one wealth-building tool for millionaires, based on actual data.
Now, why is it so important to start investing ASAP? Two words: compound growth. Compound growth is when your money makes you more money. The principal plus the interest then gains more interest, and that principal plus the interest plus the interest gains even more interest. That's compound growth, and the secret sauce to compound growth is time, which, coincidentally, is also the secret ingredient to my T's literal secret sauce. You've got to let those flavors simmer, so time plus a little cumin for good measure. That sounds delicious.
Let me show you the power of compound growth. If you waited until you were 50 to start investing, and you invested $700 a month until you retire at 65, you'd have $200,000 to live on in retirement, assuming a 10% rate of return. If you retire at 65 and you live to 80, you'd only have $199,000 to live on per year, plus what you get from Social Security, which you and I both know is chump change. Now let me give you a different picture. What if you started investing $700 a month 20 years earlier, at the ripe age of 30? Well, that would give you $2.6 million by the time you reach 65, which would give you a heck of a lot of trips to Magic Kingdom, plus an amazing legacy to leave your family. So there you go: start investing as soon as you can. How much do you invest? Once you're debt-free with a fully funded emergency fund, invest 15% of your income into tax-advantaged retirement accounts to get the most bang for your buck.
The next step you need to take in your 30s is to start saving for your kids' college, if you have them. If you don't have them, shout out to the grandmas trying to set you up with that nice bank teller named Eric, he seems swell. Little disclaimer here: saving for college should come after paying off your debt, saving for emergencies, and investing that 15%. You've got to put your own mask on first, FAA regulation, don't mess with them. Because here's the deal: your child may or may not go to college, and may or may not graduate, but there's a 100% chance that you will have to retire one day. So trust the steps and do them in order. Once you've got your own finances in order, you begin investing, you figure out how much you need to save for college, and I recommend saving using a tax-favored plan like a 529 college savings account or an ESA, an education savings account. Now, if your kid is popping zits already, you'll need to save more money faster than when your kid's younger and they still pronounce it "bascetti." I still pronounce it "bcti." Stop talking baby talk, you're a grown man. But if you can start this account as soon as your kid is born, you're going to be way ahead of the game and have way more time for compound growth to work its magic.
All right, this next step applies to homeowners and maybe future homeowners. If you don't own a home yet, I'd encourage you to keep working these steps, because once you're debt-free with an emergency fund, you're in a great position financially to pursue home ownership. But if you already have a home, the next step is to get serious about paying it off early. Before you click ahead to the next step, hear me out for a second. Not only is being mortgage-free a pretty awesome feeling, it's going to help you build even more wealth in the long run, because ditching your house payment leaves you with a ton of extra money every single month to throw at your other financial goals, like having a ball of retirement or building an at-home three-person sauna, if that's what you're into. Y'know, three-person, still none of my business. I'm telling you, wealthy people don't hang on to their mortgage, not even for the low interest rate, and especially not for a stupid tax deduction. In fact, the average millionaire pays off their house in just 10.2 years, and I'm one of them. I did it way sooner because I wanted to be financially free in my 30s, so we got really aggressive. We got a big down payment on that first townhome, and we paid it off in 26 months, leaving us with tons of margin to build wealth.
The last thing you need to do is say no to lifestyle creep. Just because you're making more doesn't mean you need to spend more. So if you were surviving on $50,000 last year and you're now making $60,000, that's awesome. But what if, instead of upgrading and getting monthly facials, you pretend like you still make $50,000, and you do something like invest the difference? Wild idea. Just do the sugar scrubs at home, keep driving that old Camry, and keep living your same lifestyle. You don't need the new car smell. You need the "I just invested an extra $10,000 a year" smell.
So if you want to build wealth in your 30s, it's all about taking the right steps in the right order and being intentional with your money. It's that simple, and it's that hard: pay off your debt, invest early, and stay in control of your spending. Plus, whether you're 30 or 22 or 52, it's never too late or too early to do this stuff, but the earlier you take action, the faster you'll see results. Trust me, I'm speaking from experience here. I took these steps before I was in my 30s, when I was just a sad, beanie-cardigan-wearing social media marketer in my 20s, and these steps are what allowed me to reach a million-dollar net worth by the time I was in my early 30s. You can find out exactly how I did it in my book, Breaking Free from Broke, which you can get right now for 20% off during the Ramsey Black Friday sale. So if you make it in time, good on you. I'll drop a link in the description, or you can go to ramseysolutions.com/store to check it out. Thanks for watching, and we'll see you next time.