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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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