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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%).
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| Money in your 30s | ||
|---|---|---|
What you have | Amount | Read more |
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. Read "A simpler way to save: The 60% solution" for help in creating a spending plan.
- 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 (read "Credit card companies' evil tricks"). 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. Read "The real reason you're broke" for details.
- 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.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
Published Feb. 8, 2007
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