Here Are the Financial Milestones You Should Achieve by Age 30
By the time you reach 30, you’ll likely feel some social pressure to achieve certain financial goals. Save a year’s salary. Be debt free. Have an excellent credit rating. While financial planning is a good idea at any age, tying certain money milestones to age 30 is completely arbitrary. Let’s look at why you shouldn’t stick to age-based financial goals and what you should focus on instead.
Finance is not universal
Personal finance is deeply personal and depends on your individual situation. Someone who lives paycheck to paycheck shouldn’t compare themselves to a friend who lives off generational wealth. There is currently no universal standard for how much you should have saved in investments or retirement accounts based solely on entering a new decade of life. Priorities that serve someone else may not make practical sense to you.
For example, aggressively paying off student loan debt straight out of college made sense for your friend who earned an engineering degree. But if you have credit card debt with a 20% APR, it’s probably best to put the extra payments toward credit cards first before rushing to tackle your student debt with a lower interest rate.
Likewise, recommendations that say you should have a year’s worth of income in savings by age 30 may not apply to someone who lived at home after college to build savings faster, or to someone else who later changed careers resulting in zeroing out income.
Set these financial goals for yourself.
Much more important than arbitrary age guidelines is to continue to improve your financial literacy . So while there are no universal rules for personal finance, there are certain standards you can try to adhere to. At 20, 25, 30 and beyond, here are some key financial plans to keep in mind.
Track your expenses and know where your money is going
Even if you don’t understand the topic of big money, you should at least understand your own money. Describe your monthly income and expenses to get a clear picture of your cash flow. Look for areas where you can save money, whether it’s eliminating unused subscriptions or eating out a little less. Here’s my guide to auditing your own expenses .
Create an emergency fund
As we’ve previously advised , a typical rule of thumb is to aim to have six months’ worth of living expenses in your emergency fund. When you calculate this number, factor in expenses such as housing, food, utilities, insurance, transportation and debt payments. Non-essential expenses such as vacations, entertainment, or eating out are not included in your “emergency” calculations.
For emergency funds, the money should go into an easily accessible savings account (that is, not a retirement account) to cover items such as medical bills or car repairs.
Pay the debt off
If there’s one thing that ruins most of our financial pictures, it’s debt. Don’t let fear of debt stop you from making a plan to pay it off. Here’s our guide to getting organized and getting out of debt . The first step is to make a list of debts by interest rate, pay off the minimum amount possible, and invest additional funds in the debt with the highest interest rate first. Once again, the important thing here is to at least have a plan, even if you can only afford to take small steps right now.
Start saving for retirement
In your thirties, retirement may seem like it’s been pushed back forever, but the key to success is to start saving now . Take full advantage of any 401(k) match from your employer . Open a Roth IRA to fund workplace retirement accounts. Consult a retirement calculator to see how much you might need to save, but again, there is no magic number. No matter your age, you can still benefit from compound interest even with a small initial investment. The important thing is that you start saving and investing as soon as possible.
Update your insurance needs as your life situation evolves.
Insurance seems unnecessary when you feel invincible. But health, auto, renters or homeowners, disability and life protection are services you hope to rarely use, but are invaluable when you need them. Here are more types of insurance than you’ll ever need, but some are absolutely essential .
Bottom line
Everyone’s money situation is different. Stay proactive by making informed financial decisions for your situation rather than chasing some false ideal of financial achievement. What you really need is to continue to gain financial literacy so that you can continue to make good decisions. Consistent savings and working toward financial goals matter more than a random net worth number. There is no set finish line for this race.