Are you ready for the big 3-0? Turning 30 is an important milestone, and where your 20s are relatively carefree, your 30s are when you start to become more serious about saving. Traditionally, most people get married, buy a home, and start a family in their 30s. This is also the time when your career usually takes off, giving you more stability and more income. It’s also the time to review your plans for the future and how to achieve them, including new money management strategies.
The 30s Are Your Boom Years
According to the Bureau of Labor Statistics, the mean salary for Americans between the ages of 25 and 34 is $806.75 per month or $41,951 per year, and for Americans between 35 and 44 the average salary is $986 per month or $51,272 per year. By the time you reach 30, you should have the equivalent of your annual salary in savings, By age 35, aim to have twice your salary in savings, including retirement savings, emergency funds, and any other money that’s been put away. Ideally, it is recommended to have eight times your salary saved by age 65.
Your 30s and early 40s are also your peak earning years, so this is the time when your money management strategy should focus on putting money aside. According to PayScale, college-educated men continue to earn more until they reach 49, and peak earnings for college-educated women top out at age 40. It’s during your 30s that you will see the fastest salary growth and want to correct course toward achieving your long-term financial goals.
Time to Get Serious About Money Management
It’s time to get serious about planning for your future. Here are some money management strategies that smart 30-somethings consider:
Go beyond basic budgeting.
Chances are that you haven’t really adjusted your budget since you graduated from college, and to date your biggest concerns have been having enough money to buy the latest concert tickets or splurging for a weekend trip. You have to start thinking more carefully about how to manage that disposable income. Just because you are making more doesn’t mean you have to spend it. Set bigger, smarter goals, such as moving to a new area to advance your career or saving to buy property.
Build your emergency fund.
You do have an emergency fund, right? What happens if you lose your job, or you are unable to work? Could you pay for essentials like rent, food, and health insurance? Some experts say to save for three to six months’ worth of emergency expenses; others say to save for eight months’ worth. Your emergency fund should be large enough for you to feel confident that you can deal with any kind of emergency.
Putting money in a savings account or money market account is a great way to get started, but to really put your money to work you need to diversify. Any serious money management strategy includes investments. It’s easy to get started in your 20s with a company retirement plan, but opening an investment account gives you more options, and will help you acquire more earning power. Wise investments can yield between 7% and 10% in returns, which is better than a savings account or 401(k), and the longer you invest, the more you can earn. Talk to your local credit union to get started.
Dump your debt.
It’s time to pay off those student loans, as well as any credit card debt. As you look ahead, you want to clean up your credit and raise your credit score. Consider consolidating your debt into a more manageable personal loan, or using a zero-interest credit card for a balance transfer. Your objective is to clean up your debt, reduce your number of monthly payments, and free more money for savings.
Buy more insurance.
You likely have auto insurance and medical insurance, but you should consider additional insurance. Life insurance is a smart addition to any money management plan, even if you have coverage through your employer. Life insurance policies become more expensive as you get older, and they are something you will need in the future. Also consider disability insurance. You probably have disability insurance through your employer, but most policies only pay 60% of your salary, and so additional coverage will help you bridge the gap to cover living expenses.
Save (more) for retirement.
You probably already have a retirement fund set up through your employer, but whatever you save in a 401(k) or pension plan won’t be enough for retirement. The most you can earn through a 401(k) auto-enrollment plan is 3%, but experts say you should try to save 15% for retirement. Your employer may even match your 401(k) which will bring you closer to 15%, but you should contribute to an individual retirement account (IRA) or Roth IRA to supplement your retirement savings.
As you get older, money management decisions become more complex. You need to plan for the future, but it can be difficult to set priorities and develop strategies to achieve your financial goals while still budgeting for everyday expenses. That’s why no one should tackle a money management strategy without expert help.
iQ Credit Union is committed to helping its members achieve their financial goals, and we have the tools and experts to help you with your money management plans at any age. To get started, check out our Budgeting Checklist to help you refine your household budget.