A 5-Part Financial Checklist for Your 30s
You're ready to get serious about money. But what kind of goals are realistic and important at this stage in your life?
Your 30s are a great time to take stock of where you are now and what you want your future to look like. You've still got decades to go before retirement, but you're also likely in the early stages of things like saving up for a house and building up a college fund for your kids.
That means you've got time on your side when it comes to achieving your financial goals, but you may also be feeling overwhelmed by the sheer number of goals you're juggling right now.
If you have no clue where to start or you just want to check whether you're prioritizing the right things and setting realistic targets for yourself, here are a few benchmarks to use as a reference – along with some tips for catching up if you feel like you've fallen behind.
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The basic financial goals to work on your 30s
Your financial goals will depend heavily on your personal needs and wants. With that said, here are some foundational goals that can help you work toward financial security. By the time you reach your 40th birthday, you will ideally have:
1. An emergency fund totaling at least three months of income
If you have no emergency fund right now, a good milestone to aim for first is $1,000. Then aim for one month of income. Finally, aim for three months.
2. $40,000 saved for a down payment on a house
The median age of a first-time homebuyer hit 40 last year, according to the National Association of Realtors. So, if you're still renting in your 30s, you're not as far behind as you might feel when comparing yourself to previous generations.
Instead of stressing about not owning a home yet, aim to have a good down payment saved up by the time you hit 40.
This dollar amount is based on having about 10% to put down on a home selling for today's median price of $403,200. Realistically, a 20% payment would be better, as would a little padding on top of that to account for inflation and the unexpected repair bills that inevitably come up in the first year or two of homeownership.
But if you're starting from zero, that 10% down payment is a good beginning goal. You can reevaluate this goal as you get closer to the day you'll actually start househunting.
3. Zero consumer debt
Aiming to be debt-free by 40 is a great goal, especially if you are also hoping to buy your first home by then. The less debt you're carrying when you start the house hunt, the better your debt-to-income ratio will be.
This will, in turn, set you up for an easier mortgage approval process. If you have credit card debt, that's your top priority. After that, any other loans you have, including student loans and car loans, should be prioritized by interest rate.
4. $260,000 in retirement savings
A popular rule of thumb is that you should have three times your annual income in retirement savings by the time you're 40. According to the Federal Reserve, Americans between ages 35 to 44 earn a median income of $86,470. So, a healthy retirement fund for someone earning that much at age 40 would be just under $260,000.
5. $4,500 per year per child in a college fund
For example, if you have one child who is 5 years old, you'd want at least $22,500 in a college fund. This number assumes you're hoping to cover around half of the total cost of college. Currently, the average estimated cost is between $30,000 and $51,000 per year, according to The College Board.
By the time your child reaches college age, it will likely be higher. But if you use today's numbers to set your target and put those savings in a 529 plan where it can grow, the interest earned will help offset the rise in tuition rates.
Most Americans in their 30s are falling behind on these financial goals
If reading through those financial targets above left you feeling overwhelmed, you're not alone. Based on broader economic data, most Americans in their 30s are unlikely to be on track with every goal, and many aren't in a position to catch up on all of them by the time they hit 40.
According to data from the Federal Reserve, someone in their late 30s typically has:
- $45,000 in retirement savings
- $7,500 in transaction accounts (which includes checking and savings accounts).
- $10,000 in certificates of deposit accounts, a popular choice for long-term savings goals like saving for a down payment.
- $43,900 in consumer debt, including $2,900 in credit card balances, $25,000 in student loans and $16,000 left to pay on a car loan.
If this financial snapshot looks similar to your own and you're 35 right now, you have about five years to wipe out as much consumer debt as possible, quadruple your retirement fund, add another $30,000 to your down payment savings and another $15,000 to your emergency fund. That's not to mention keeping up with that college fund if you have kids.
That's a tall order, especially if you're earning the median income of $86,470 mentioned above and have normal living expenses to think about, too.
In that scenario, you have to prioritize some goals over others.
For example, if you're struggling to decide between putting a little extra toward your kid's college fund or your own retirement, the answer is almost always retirement. If push comes to shove, student loans aren't ideal, but they do exist, so you have a Plan B there. But running out of money in retirement is harder to work around and could end up putting financial pressure on your child anyway if they have to support you in your retirement.
If you're behind on your down payment savings, on the other hand, hitting that number may be more time-sensitive than catching up on retirement. Once you buy a home, the money you're budgeting for rent could instead go toward paying off a mortgage. That would allow you to redirect the money you were originally saving up for a down payment toward retirement.
So, hitting your down payment goal sooner would potentially give you more time and more room in your budget to catch up on your retirement savings a few years from now.
How to achieve your financial goals (even if you're behind)
Instead of pressuring yourself to catch up on every financial goal at once before you hit 40, you should instead prioritize catching up on one or two of the more urgent goals (like paying off debt or building an emergency fund).
Then, if there's any room leftover in your budget, aim to make modest progress toward the rest of those goals so that you're a little less behind on them by the time you're 40. Here are a few tips to make that happen:
Personalize these financial targets to your own life first
The numbers above are general guidelines. The first step toward getting on track is figuring out the numbers you, personally, should be targeting. Then, assess where you are right now. Maybe you're behind on retirement, but you've been good about avoiding debt. Maybe you've racked up debt, but you also got an early start on retirement savings, so you're doing fine there.
Revisit and rebalance your budget at least once a year
By your 30s, you may already be "adulting" well enough to stick to a budget. If not, now is a good time to establish one. There are a lot of great budgeting apps out there that can help you with that.
For those who already have one, this is your reminder to not treat it as a "set it and forget it" tool. At least once every year, do the following to prevent your expenses from creeping upward:
- Call your service providers to ask for lower bills. I tried this personally and got great results from it. It only takes a couple of hours, and you could save hundreds.
- Shop and switch your car insurance whenever you find a better rate. Do the same for home insurance if you have it. Shopping regularly can save you hundreds on insurance without having to change your coverage. But you should also do an annual insurance review to make sure you're not paying for more coverage than you need.
- Reevaluate any nonessential monthly expenses. "Streamflation" is real. Even if you don't want to give up your favorite subscriptions, sometimes threatening to cancel is enough to get a steep discount offer. Aside from streaming, look for other ways to reduce nonessentials. If going out for a fancy coffee is one of your favorite treats, for example, you might cut back from every day to once a week.
If you have debt, work on lowering your interest rates
When paying off debt, the payments you're making each month are only half of the picture. The other half is tamping down those interest rates every chance you get.
Here are a few ways to do that:
- Call and ask for lower rates. The worst thing that can happen is you get told "no." The best thing that can happen is you shave a percentage point or two off your interest rate, potentially saving hundreds or more in interest.
- Use 0% intro offers on credit cards strategically to pay down high interest debt faster. The key to making this strategy work is making sure you can pay off the balance before the introductory period ends and being disciplined enough to not build up new debt after this old debt is gone.
- Consolidate high interest debt into low interest debt. If you've got multiple credit cards carrying balances at interest rates of 20% or more, taking out a personal loan with an interest rate closer to 10% could save you money on interest and help you pay off debt faster.
Make every account you own work for you
No matter what your income is now, ensuring that you're earning as much interest as possible on every dollar in both your savings and checking accounts can help you reach your goals that much faster.
Just as you should be re-shopping your insurance every year, it's a good idea to check the APY on your bank accounts at least once a year and switch if you find better rates elsewhere. Use our savings tool below, powered by Bankrate, to see how your current savings account compares to the best offers available today:
Resist lifestyle creep
As you work toward growing your earning potential, it's easy to fall victim to lifestyle creep. It can happen in subtle ways, like collecting tons of subscriptions or little splurges here and there because "it's only $5." But it can also happen in more obvious ways, like immediately upgrading your car even though your current car is fine.
One way to manage this is to create a realistic budgeting rule for yourself now. Anytime you get a raise or a better-paying job, you might decide that 70% of that additional income is going toward your goals and the other 30% can go toward enjoying the fruits of your labor. You don't need to do a 70/30 split, but whatever you do settle on, be sure to automate those revised financial goals as soon as your first new paycheck hits your account.
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