By the time you hit 30 years old, you’re probably feeling some societal pressure to have reached certain financial goals. Save a year’s salary. Be debt-free. Have an excellent credit score. While financial planning at any age is a good idea, pegging certain money benchmarks to turning 30 is completely arbitrary. Let’s take a look at why you shouldn’t hold yourself to age-based money goals, and what you should be focusing on instead.
Finance is not one-size-fits-all
Personal finance is deeply personal and depends on your individual situation. Someone living paycheck to paycheck shouldn’t have to compare themselves to a friend living off generational wealth. There’s no universal standard for how much you should have amassed in investments or retirement accounts thus far based solely on crossing into a new decade of life. The priorities that serve someone else may not make practical sense for you.
For example, aggressively paying off student loan debt straight out of college made sense for your friend who graduated with an engineering degree. But if you have credit card debt with a 20% APR, it’s likely best to direct extra payments to credit cards first before rushing to tackle lower interest education debt.
Likewise, guidelines stating you should have one year’s income in savings by age 30 may not fit someone who lived at home after college to build savings faster or someone else who changed careers later, resulting in an income reset.
Set these financial goals for yourself
What matters more than arbitrary age targets is to keep growing your financial literacy. So while there are no one-size-fits-all personal finances rules, there are certain standards you could try to hold yourself to. At 20, 25, 30, and beyond, here are some key financial plans to have in place.
Track your spending and know where your money goes
Even if you don’t understand big money topics, you should at least understand your own money. Outline your monthly income and expenses to get a clear picture of your cash flow. Look for areas where you can save, whether it’s cutting out unused subscriptions or eating out a little less. Here’s my guide to conducting a spending audit on yourself.
Build an emergency fund
As we’ve previously advised, the typical rule of thumb is to aim for six months’ worth of living expenses in your emergency fund. When you’re figuring out that number, factor in expenses such as housing, food, utilities, insurance, transportation, and debt payments. Non-essential expenses like vacations, entertainment, or dining out don’t belong in your “emergency” calculations.
For emergency funds, the money should go into an easily accessible account savings account (aka not a retirement-specific account) to cover issues like medical bills or car repairs.
Pay down debt
If there’s one thing tanking most of our financial pictures, it’s debt. Don’t let a fear of debt stop you from making a plan to pay it down. Here’s our guide to getting organized to pull yourself out of debt. One place to start is by listing out debts by interest rate, paying what minimums you can, and putting any extra funds towards the highest-interest debt first. Again: What’s important here is to at least have a plan, even if you can only afford to take baby steps right now.
Start saving for retirement
Retirement may seem forever away in your thirties, but starting to save now is key. Take full advantage of any 401(k) match from your employer. Open a Roth IRA to supplement workplace retirement accounts. Consult a retirement calculator to find out how much you may need to have saved, but to reiterate: There’s no magic number. No matter your age, you can still take advantage of compound interest, too, even with a small initial investment. What matters is that you start to save and invest ASAP.
Update insurance needs as your life situation evolves
Insurance feels unnecessary when you feel invincible. But protections for health, auto, renters or homeowners, disability, and life are services you hope to rarely use, but are invaluable when you need them. here are more types of insurance than you’re ever likely to need, but some of them are absolutely essential.
The bottom line
Everyone’s money situation is different. Stay proactive by making informed money decisions for your situation, not chasing some false ideal of financial achievement. What you really need is to keep acquiring financial literacy, so that you can keep making sound decisions. Consistent saving and working towards financial goals matters more than some random net worth number. This race has no set finish line.
