They say that 30 is the new 20, or something along those lines to make all of us feel better about the inevitable act of aging. But the reality is that while today’s 30-year-olds may not be in the same financial shape as when their parents were 30 years old, by age 30, there are certain financial milestones you should hope to achieve.
The operative word here is “hope.” Not everyone can meet their financial goals by a given age due to a world of factors — injuries and associated time off from work, medical bills, or bad luck with a car that didn’t live up to its expectations. But as a general rule, it’s a good idea to try to achieve a certain level of retirement and cash savings by age 30. Here’s what your account balances should look like.
Your emergency fund should be able to pay for three months of bills
You never know when you might need to pay for a home repair or cover another bill you weren’t expecting. Similarly, you might one day lose your job through no fault of your own, leaving you to scramble to cover your expenses.
That’s why it’s so important to have a solid emergency fund by age 30. Ideally, that account should have enough money to pay for three months of essential expenses — things like groceries, rent, utility bills, and medication.
You may not have a three-month emergency fund just yet. But if not, try to slowly but surely build up reserves to get to that point so you have good protection against unplanned expenses.
One option that might help you build savings sooner is joining the gig economy. If you find flexible work you can do on the side, it could make it possible to pump more cash into savings.
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Your retirement plan should equal a year of pay
It’s important to start saving for retirement from a young age. The more time you give your money to grow, the more wealth you can build for your senior years.
Fidelity says that by age 30, you should have the equivalent of a year’s salary in your IRA or 401(k) account. And that’s feasible if you started saving for retirement years back. If you only started more recently, your balance might be lower.
One good way to ramp up retirement savings, though, is to put the process on autopilot. If you have a 401(k) through work, your contributions will be automatically deducted from your paychecks, removing the temptation to spend that money. But if you have an IRA, it pays to set up an automatic transfer from your checking account so money gets moved over for retirement savings every month.
Also, if you’re looking to catch up on retirement savings, make sure you’re claiming your full employer match in your 401(k). Unfortunately, IRAs don’t get funded with employer dollars, so as is the case with building an emergency fund, you may need to look to the gig economy to catch up on savings there.
At this point, you may have a general idea of what savings you should have by age 30. But don’t panic if your balances look different, because everyone’s situation is different. If you have less than these targets, do your best to ramp up, but don’t beat yourself up over being behind.
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