Alright, Bri, let’s go to the next decade. Let’s talk about the 30s. Now, we always call this the messy middle, ’cause frankly, this is a difficult stage of life. This is the stage of life where life starts moving at a thousand miles an hour, and you begin getting pulled in a thousand different directions. You’re all over the place. So, I think that for a lot of people, when they go off the rails, this is the decade where going off the rails happens because there are so many different ways and reasons for you to go off the rails.
Well, this is when you take the guitar off the wall and start stroking the strings, and you say, “Look, this is when you sound like the country music star and say the days are long, but those years sure are short because it is the messy middle in so many ways.” Think about this. I mean, we even have some charts, and we pick on poor Rebi about this all the time, but the financial stages of life, and you get it when you get out of college or wherever when you just start your professional life. Yeah, you might not make a ton of money, but you don’t have a lot of disposable income. You also don’t have a lot of financial commitments.
But man, oh man, when you get in your 30s, it feels like your disposable income is slowly going up because you’re starting to get some mastery of your skill set. But those commitments take off like a rocket ship. I mean, whether it’s getting a house, having to buy the first, you know, getting married, getting the first house, having a growing family. All of a sudden, your wallet or your purse is going to get compressed like you’ve never experienced before. And not only is that happening, but at the exact same time, your time begins disappearing as well.
If you look at how much disposable time that you have relative to the amount of commitments that you have, you also have less time to focus on all the things that you might like to focus on. So, it becomes this perfect storm of getting distracted and not even getting distracted in a negative sense but taking your eyes off of the things that are not absolutely on fire because you’ve got career, family, kids, community, all the different things pulling you in all the different directions. It’s not uncommon for your financial life to fall on the back burner, and rightly so, because of all the things you have going on.
So, what you have to do in your 30s is be diligent to recognize that and do your best to not let it slip away because this is a decade where time is still your friend. It is not your enemy if you can get the ship righted in your 30s. Yeah, but it is going to be full of distractions. You’ve said that. So, I think the superpower for you people watching in your 30s is how do you drown out all the noise, distractions, everything else that Bo was just talking about and see the line just like if you’re a Formula 1 driver. You know there’s a best, better way to follow the line and cut the corners and do everything else. Your financial life is the exact same way.
We want to give you the three things you should focus on in this decade. So here’s the first one: stop trying to keep up with the Joneses. Nobody cares what your next-door neighbor, what the person who sits in the office across from you has going on. It does not matter what they have going on. So often, we look on social media. We look around us. We look to the left. We look to our right, and we assume that that should be what our life looks like. And we don’t know the rest of the story. We don’t know what their financial situation looks like. We don’t know what their family situation looks like. We don’t know that they might be up to their eyeballs in debt.
So don’t sacrifice your financial well-being simply by trying to keep up with what you think other folks have going on. Well, comparison is the thief of joy, and it’s one of those things where I think you’re going to find out someone’s always going to have more money than you. Someone’s always going to have less money than you. So if you’ll just quit looking on other people’s paper and focus on you, what is your best life, and what’s your why? What creates happiness and fulfillment for you? The moment you kind of break through all of that, I think you’ll just be so much happier. I mean, that’s where contentment resides somewhere in all that. And that’s why it kind of transitions nicely into the second point is know what you just don’t know.
And I think that’s the part, especially for a lot of you who don’t come from resources, you’re pretty humble in where your knowledge is. So you ought to use that as a superpower to figure out how do I pinpoint what’s important and then maximize all of my opportunities. Yeah, in your 20s, saving 25% was a goal. It was this idea, I need to get there. It’s aspirational to get there. In your 30s, I’m going to argue it’s a must. You need to build your life around figuring out how can I get to a 25% savings rate.
All that grace that Brian talked about in the 20s and all that latitude that you received in the 20s begins to go in the way in the 30s because this is buckled down time. You have to get your savings to 25%, and you need to know why that has a huge effect on your financial life. And it wouldn’t be messy unless you also had another objective is that you also need to understand that this is the point when you have people now counting on your income where you might be the breadwinner or you now might have the obligation with a mortgage. You’ve got a family. You’ve got kids. You’ve got to make sure that you have an emergency reserve because cash is going to be the oxygen of your life when you get through crisis mode or you go through the things where, you know, maybe it could be small things like the tire repair from a flat tire or you drop your phone into the commode. I mean, little things all the way up to the big things like having your highest deductible covered. So if you had a health emergency, you’ve got to have an emergency reserve and some of those basic things of the financial order of operations covered so you’re just not sidetracked while you’re building your journey.
And in your 30s, you also have to recognize how dangerous liabilities in that side of the equation can be for, you know, compound interest can be an amazing ally, but it could also be an incredibly fierce adversary against your wealth-building journey. So keep an eye on your 30s out for those big mortgages, those big auto loans starting to rack up credit card debt. You need to understand why that is so difficult for you to build long-term wealth. And if you can avoid that in your 30s, you’re likely going to set yourself up in a much better position. Well, living in a consumption society like we are, I mean, I think about all the different traps that are set up. Yes, your income starts going up in your 30s, but they also will let you now finance a car for 72 months to where if you’re spending $700 to $1,000 a month, you can buy the most luxurious car in the world.
But this is a million-dollar decision. If you actually go out to look at our wealth multiplier, if you do these types of behaviors while you’re starting to get traction with your income, it’s going to be a failure because you’ve got to turn that income into assets, owning stuff, so it can work for you. That’s going to be the part that really makes it, and that’s the transition point into number three is are your decisions becoming purposeful?
Yeah, when you make a financial decision, there needs to be reasoning behind it. You ought to be thinking in this way. Your conversations, your mindset ought to be, it’s not, “I should be saving for the future,” but you’ve now defined, “I am saving 25% because you understand what the finish line looks like and why you’re making the decisions that you’re making. In your 20s, oh, I just want to be a millionaire. Well, you don’t know what that means in your 20s. In your 30s, you start to begin to understand, hey, I want to be a millionaire so that I can stop working so that I can do this with my family so that I can have this kind of life.”
And what’s beautiful about your 30s is even if you didn’t figure this out in your 20s, even if this was a foreign concept to you, if you can start saving 25% in your 30s starting from zero at 30 years old, if you save 25%, you will likely be able to replace 80% of your pre-retirement income just from your portfolio by the time you hit 59. That still counts as an early retirement. If you wait till 35, you can still hit your number, still hit your goal by 64. And even if you wait till 39, and we’re not advocating that you do that, but if you were a 39-year-old and you haven’t started, even if you start now and you can start saving 25%, you’re going to have the ability to have a very robust, very exciting retirement in your 60s. But you’ve got to get started now. You have to recognize what that 25% can do for you.
Yeah, another part of being purposeful, Bo, we were hitting on this. We talk about how valuable time is, and we talk primarily in the 20s about your time is also what could be going towards investments and the wealth multiplier. But I want you to think about time also as the element of what you do and spend your time doing to make money. When you’re starting out, it’s important that you just have a job. But if you’re really being purposeful with your time because wasting time can be more expensive than even wasting money is by. In your 30s, I’d like you to have a career so that way it feels like your time commitment that’s going into you’re sacrificing your time to earn a wage or to go start a business. Be purposeful with your time so it’s not just that I have something that pays the bills or occupies my time and pays me a wage. Now, it’s I have a career. I have a path. I know where I’m headed.
And then as a consumer, your language changes from I want to buy X to I don’t need to buy this because I want the luxury car. I don’t need to buy the luxury car because I have other goals that are more important or whatever that may be for you. So, in your 30s, if you can transform your mind to start thinking about financial decisions in this way, you are likely going to set your future self up for big success. Bo, let’s walk them through the actual numbers of this decade. Let’s talk about Americans in their 30s. What’s the household median household? Remember, this is a household can be couples, families. You know, this is everyone in the house that’s working. 75,419.
Again, this data comes from the Federal Reserve survey of consumer finances found the median household income just over $75,000 for someone in their 30s. So if you’re in your 30s, what we want you to do is we want you to calculate your net worth right now, or I’m sorry, where your net worth should be. So take your age times your income and then divide it by 10 plus the number of years until you’re 40. So if you’re 35, you get 5 years till 40. Your denominator would be 10 plus 5, 15. Calculate that. That will tell you where your net worth should be if you’re an average accumulator of wealth.
So do a self-assessment. Am I hitting that number? If you’re not, let this be the wakeup call to get the ship moving in the right direction. ‘Cause I think a lot of folks in their 30s have not caught on to this because when we look at the average numbers, the median numbers, a 30-year-old right now in this country has a median net worth of $61,000. But when you really peel back the layers, only 17 of that are financial assets. By the time you get to the end of the decade, a 39-year-old total median net worth about $128,000. Financial assets, I’m going to use the word only $31,000 on the median for a 39-year-old in this country.
Yeah, I mean, we got to get the financial assets numbers up, guys. In your 30s, this is why if you have the aspirational goal in your 20s of getting to 25% of your gross income going to savings and investments, you got to really be hitting the mark in your 30s. That’s why your still time is your friend. There’s a reason when we use the millionaire next door formula for net worth, we modified it for anybody under 40 years of age with that denominator adjustment. Take advantage of while time is your friend. It’s not your foe yet. You’re getting really close as you get into your 40s and 50s that time will start to work against you.
Focus on building up those financial assets. Make a Roth contribution. Go check out the Financial Order of Operations. Figure out exactly where you need to be with your next dollar so you don’t end up like our peers, our neighbors who are woefully struggling to build financial independence.
