Pattie Lovett-Reid: How to be 'smart' with your money in your 30s

TORONTO -

If you are in your 30s, it is time for some financial tough love.

Don't worry, I'm not about to tell you it is time to start saving for retirement -- but I am going to tell you that you need to have a financial plan, and that it's time to get "smart" about your financial life.

Seriously, you have so much going for you, and your biggest financial asset is time. It gives you the ability to go out and earn a living and build up your human capital, which in turn will help build your financial capital.

Let's break it down:

"S" - keep it "simple" and get it "started." As Cindy Marques, CFP and CEO of MakeCents in Toronto told me, "formal financial plans can cost thousands of dollars, and ultimately present as a fixed written report that might look nice printed and bound in a neat folder ... but this doesn't allow for quick adjustments when plans change (which they often do!)." Instead, consider using a customized Google spreadsheet that can be updated easily and reflect a shift in circumstances. 

"M" - what is your "motivation" for saving money? Set a goal that excites you and most importantly leads you towards building your wealth. Target a small amount of money and align it toward savings, investing or debt reduction. Remember that time and compounding rates work wonderfully well when you are creating wealth. You earn income on top of income. However, it works against you and can destroy your wealth when you owe money. Interest is charged on top of interest.

"A" - your plan should be easy to understand and "actionable." Begin with breaking down your income, how much money you have coming in and what it is you are spending your money on. Look for opportunities to reduce reoccurring costs and ongoing expenses that are unnecessary or a financial drain on your cashflow. Use your spreadsheet to document your progress. Break your tasks down into bite-size actionable steps. For example, cancel unnecessary subscriptions, negotiate a better insurance rate, or look for ways to cut your food bill.

"R" - make your plan "relevant" to you and targeted toward the area you are most concerned about. Marques tells her clients that "the key for successful implementation of your financial plan is about knowing exactly what you need to focus on and being concise about it in order to target the solutions." For example: maybe you only need help with cashflow planning and debt management. If that's the case, stay focused on only that.  

"T" - "time" truly is on your side. However, you need to remember that you are halfway to retirement. Yes, I said "retirement." It's true. Even though it is still way down the road, tuck a little away today, as it comes faster than you think.

Bottom line: Stop spending all the money you have coming in. Embrace financial maturity and get your debt under control, and this alone will help set yourself up for financial success in your 40s.