Tips on Becoming Debt Free and Building Assets?During Your 30s ...

Introduction

There are four cycles of financial life. In this article, I share my thoughts and suggestions on the second period?age 30-49. Before getting into those details, let me make a few general comments that apply?regardless of which of the four cycles your are in.

General Comments

Your financial action plan should take into account the cycle you are in now, those yet to come, and your present and desired financial profile. The more you adapt your preparation, planning, sharing, saving, investment, and spending strategies to the stage of life you are in now and the ones you have yet to encounter, the more successful you will be. Some strategies that are appropriate when you are single and twenty-five are often not appropriate when you are married and fifty-five or when you are not married and fifty-five!

Some factors other than age and marital status that help point to the appropriate financial strategies are: Current and desired housing scenario; preferred age to retire and any money already in place to fund that objective; number of children, their ages, plans for them to attend college and any money already in place to fund that objective.

Since some investment suggestions are included, I want to pause to mention that when investments are viewed by objective, normally they are referred to in one of two categories? either as a growth or income-oriented investment. A growth investment is made primarily to preserve seed capital and increase its value. A growth investment?s income?interest, dividends, capital gains?is normally allowed to compound (automatically reinvested) so that the investment grows as quickly as possible. A growth investment might be purchased for the long or the short term, but normally it?s bought for the long haul. That longer window of time accommodates being more aggressive in risk taking. An income investment is made primarily to preserve seed capital, while providing regular payouts to the owner. The investment?s income?interest, dividends?is paid out automatically, either to a separate account or by check directly to the owner. This type of investment might be purchased for the long or the short term, but normally it?s bought to be held for fewer years. Because of the shorter holding period, an income investment typically involves less risk taking.

Financial Cycle 2 (Age 30-49)

My primary suggestion for this wonderful life period is to continue to concentrate on developing and maintaining the good money habits I recommend for cycle one (Up to Age 29) In case you have not read that article, I suggested practicing the following four wise financial habits:

1. Give away a minimum of 10 percent of your after-tax income.

2. Save at least 20 percent of your post-tax income for future needs.

3. Spend moderately and efficiently?live on 70 percent of your after-tax income.

4. Invest via a conservative strategy that is well defined.

In addition, during your 30s and 40s, I also recommend you strive to achieve the following specific financial objectives:

_ Pay off your home mortgage, if possible, by the time you are forty.

_ Keep as consumable debt free as possible.

If you must borrow at any time during this stage of life, be sure it is for investment assets, not for fast-depreciating consumable goods like cars, boats, overly expensive vacations. When you borrow, be certain you are borrowing because of absolute need?not frivolous, expensive desire.

Those are the most important financial objectives to reach ?before forty, if possible. Indeed, the sooner you achieve those two goals, the more money you will have available to fund other key needs like college for the kids and personal retirement.

_ Increase the percentage of your income that you save during this cycle.

The more years you have to save at this level, the more assets you will have to meet needs of the coming years.

_ If a housing purchase is made in cycle two, it is wise to apply the same guideline as given in cycle one.

To repeat it, don?t buy too much house. Pick one you can payoff in 8-12 years. Buying too large a home can consume cash flow that could be better used to fund other financial objectives.

_ Continue to invest your savings wisely for future need.

_ Minimize your taxes through sound strategies?within the clear black-and-white of the tax code.

No ?gray area? stuff! For example, start funding a 401(k) plan to the max if such a retirement savings plan is available with your employer. If you are self-employed, you will want to consider a SEP (Simplified Employee Pension). Regardless of your employment status, IRAs are an option worth considering.

Other Cycle 2 Suggestions

During this cycle some of your investments can still be as speculative as in the first cycle; you still have time before retirement to recover from any setbacks.

As you move into your forties, however, start shifting your investments to more conservative mutual funds. It?s still okay to have the investment portfolio skewed toward equities, but do have a good percentage of bond mutual funds.

For those who have saved little or none, don?t give up! If you are tempted to think it?s too late, I urge you to not be discouraged and quit. Instead, seek and apply God?s encouragement, strength, and wisdom for your finances. Start where you are now, with what you have now. With God?s great help, make gradual, small changes. Success in little things will encourage you to make bigger changes later.

And if you are among the many?in any of the four financial cycles of life?who don?t overspend but still struggle to make ends meet financially, then don?t throw up your hands and say, ?No way can I apply these concepts!? Start by counting your blessings. To a much greater degree than perhaps you have realized?be you single parent or hourly laborer or widow or other?you are already richer than many will ever be. Use the spiritual and emotional wealth from your relationship with God?your faith, courage, and sheer determination?to dwell on what you have, not on what you don?t. And, put your energy into partnering with God to create a better life?in your finances and all life dimensions!

Summary

Regardless of your age or financial profile, God is the Higher Helper who wants and can help you wisely manage your giving, saving, spending, and investing. Whether you are single or married, if you partner with Him to cultivate and practice the habits and strategies shared, you will lay a solid foundation for a lifetime of success with money. That foundation should be built on throughout the four cycles as appropriate.

In depth discussions of the four cycles of fnancial life and much more are covered in my best selling book (7 Laws of Highest Prosperity) and its companion (Wisdom and Money). Click here to view summaries and covers of those and other of my books: ?http://difference-maker.net/Books.html

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About the Author

Cecil O. Kemp Jr. is a former practicing CPA and founder of a very successful financial planning and investment advisory firm. He and his wife Patty have written 26 books, are sought after inspirational speakers, life, business and financial coaches and co-hosts of The Difference-Maker Online Radio Show. To purchase books or for more information on them and their services and Radio show, visit their websites:

http://www.cecilkemp.com/

http://difference-maker.net/

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