By Patrick Amey
The Shamrock, while not the national symbol of Ireland, will be one of the most prevalent symbols around town on March 17th as Kansas Citians gather to celebrate St. Patrick’s Day. A popular legend from many centuries ago says that St. Patrick used the Shamrock and it’s three leaves to explain the Catholic mystery of the Holy Trinity. While the symbol evokes different meanings today, sometimes of green beer and revelry, I will use the Shamrock symbol to provide three areas of financial planning that people in their 30s should focus on – saving consistently, building an emergency fund, and managing your human capital.
Saving Consistently – Income and expenses change annually for everyone, so figuring out how much to save at the end of each month can be difficult. Get in the habit of paying yourself first. Allocate a part of each paycheck to 401(k)s, Roth IRAs, brokerage accounts, and personal bank accounts. Where you save is important but developing the habit of saving is paramount. There are many rules of thumb on how much to save. My personal favorite is 70%/10%/10%/10%. Spend 70% of your take-home pay, save 10% to long-term goals, 10% to short-term goals, and give 10% to charity. Again, the habit of saving is more important than the amount. For many people, their biggest earning years are ahead of them when they are in their thirties, so having a system to save consistently will be beneficial as you earn more.
Build an Emergency Fund – Once you have established the habit of saving, it is crucial to create some form of cash reserve. Dave Ramsey is a big fan of the $1,000 emergency fund to get out of debt. I think that $1,000 is a little lean, but his premise of having any type of reserve to keep us from turning to credit to finance the unexpected is spot-on. We need to have a buffer when something goes wrong – a job loss, a roof replacement, the hot water heater goes out – they all have the same effect. They interrupt our monthly cash flow, so we need to come up with a quick solution. An emergency fund allows us to finance life’s disasters on our own terms. How much should you have in your emergency fund? We recommend at least three months of fixed expenses. Talk to your financial planner about what is reasonable and plan to save toward that number.
Managing your human capital – We speak of human capital in two lights – your career and your passions. Establishing a written career plan in your 30s can set you up to be a big-time wage earner in your 40s and 50s (our highest earning years). Invest in your education and training to be sure you are ready when your name is called to take the next step in your career. Develop a relationship with a mentor. A sponsor, or someone within the organization who appreciates your work and promotes you to others, is also an important asset. It’s not all about work, however. Our passions are what keep us going each day. We all have them, even if we must dig deep for them. These can get lost or fade to the background in our 30s as life becomes more complicated with more demands on our time. It is important to continue activities that keep us moving forward. I, for one, look forward to enjoying one of the more cherished Irish leisure activates this St. Patrick’s Day – family, friends, and perhaps a pint.
For help getting started with a basic plan, schedule a meeting by clicking below, contact Patrick Amey –email@example.com, or call (913) 345-1881.