How to Invest in Your 30s the Easy Way

If the 30s had a tagline, it'd be: There's no time like the present to prioritize. Either that or: Juggling would be so much easier with eight arms. Because life in your 30s is a constant juggling act of competing financial priorities.

You're paying bills and saving for retirement, a first house and maybe college, all the while with debt clinging to your ankle like a recalcitrant child. And speaking of children, when did diapers get so expensive? By the time your kid stops pooping her pants, there won't be any money left to pay for college.

"The biggest difference between [financial] planning in your 20s and 30s is life just gets more complicated," says Michelle Brownstein, senior vice president of private client services at Personal Capital in San Francisco. "A lot of clients come to us in their 30s because they're juggling so many things [they] don't even know where to start."

The trouble with getting your ducks in a row is the longer you wait, the harder they are to line up. (Kind of like children.) Unfortunately, life is only going to get more complicated from here.

What few people realize is the longer you wait to start saving for retirement, the more extreme the sacrifices you have to make today become, Brownstein says. A 40-year old would need to save twice as much per month as someone who started saving for retirement at 30 to build the same sized nest egg.

The good news is "it's never too late to get on the right track," Brownstein adds. Today can be the day you nail down your priorities and figure out how to invest in your 30s so you can retire how you want when you want.

[See: 11 Tips for the Sandwich Generation: Paying for College and Retirement.]

Your financial priorities in a handy list. Before you can start investing in your 30s, you need to know where to allocate each dollar of savings go to maximize your return. To help you do that, here is a 30-something's list of financial priorities:

1. Get rid of "bad debt": This is any debt with a higher interest rate than you could earn on your investments, Brownstein says. Think credit card debt and anything with over 8 percent interest.

2. Build an emergency fund: Have three to six months' expenses in cash so you won't be forced to take on more debt or tap investments when you need fast cash.

3. Save for retirement: Retirement may seem far off, but saving for retirement needs to be a priority today. If you don't save enough, the options are to keep working or hope your kids have an extra arm to juggle your upkeep along with their own. Online retirement tools like CalcXML's "How much will I need to save for retirement?" calculator can help you determine how much you need to save each year to reach your goal. Contribute enough to your 401(k) to get the company match, then put as much as you can into a Roth for tax-free growth.

4. Save for everything else: Only if you have money left over after meeting your retirement savings obligations should you save toward other goals like tuition. "A good rule of thumb for parents is if you want to send [your kids] to a public school it's going to be a car payment," says David Tam, a San Diego-based financial advisor at Edward Jones. "And if you want to send them to a private college it could be as much as a house payment." Thankfully there are loans, financial aid and summer jobs.

How to invest in your 30s. Once you know your goal, you can determine how to invest to reach it.

"The biggest driver of returns is your asset allocation," meaning the proportion of stocks, bonds and alternative assets like real estate in your portfolio, Brownstein says. "We like to see investors in their 30s being a bit more aggressive if they can handle the volatility" because this will set them up for "more growth over time."

In your 30s, you can be anywhere from 80 to 100 percent stock because "you have decades to ride out market volatility," says Karen Wallace, senior editor at Morningstar.com in Chicago.

That said, many 30-somethings today have only invested in an up market and may not know how volatility will affect them. Don't be so aggressive that when a downturn happens you panic, Brownstein says. "Putting everything in one stock or one area of the market is never a good idea."

One of the most common mistakes Tam sees is investors falsely believing that by investing in a few different mutual funds they're diversified. Even if you own domestic small-cap, mid-cap and large-cap funds, you're still 100 percent in U.S. stocks.

"Having exposure to the entire [global] market is important," Tam says. Aim for 15 percent to 35 percent international exposure through foreign stocks and foreign bonds, he says.

[See: 8 Do's and Don'ts During Market Volatility.]

Use target date funds as a guide. To help you allocate your portfolio, Wallace suggests mirroring target date funds with your anticipated retirement date. The Vanguard Target Retirement 2050 Fund (ticker: VFIFX), for example, is designed for investors who plan to retire in 2050. It's currently about 53 percent U.S. stocks, 35 percent foreign socks, 6 percent U.S. bonds, 4 percent foreign bonds and the rest cash.

To create a similar allocation, all you'd need are four funds: a total stock market index, an international stock index, a total bond market index and an international bond index.

Brownstein likes low-cost index ETFs such as those from Vanguard, Schwab or iShares. "Blending in individual stocks when a portfolio enters the six-figure range can lead to a more tailored approach," she says.

"Keep a simple allocation you can stick with and understand what your investments are doing," Wallace says. Life is complicated enough; your investments don't need to be.

Invest with your spouse. Once you've built your portfolio, check in at least once a year to make sure you're on track to meet your goal. The you in that sentence is a collective you, as in you and your spouse, should you have one.

If you're married, "look at your overall allocation and see if it makes sense for you as a couple."

Wallace says. You're essentially "one economic entity that needs this much money to retire" and you should plan as such.

[See: 10 Tips for Couples and Young Families to Build Wealth.]

"One person shouldn't be the sole financial manager," Tam says. Even if one partner handles more of the decision-making, no one should be left in the financial dark.

Coryanne Hicks is an investing reporter for U.S. News & World Report. She is an expert at investing strategies and theories, investor education, investing psychology and behavioral finance. Previously, she was a fully-licensed financial professional at Fidelity Investments where she helped clients make more informed financial decisions. She has ghostwritten financial guidebooks for industry professionals and even a personal memoir. She is passionate about improving financial literacy and believes a little education can go a long way. You can contact her at crhicks@usnews.com.