There's something about being in your 30s that feels more adult.
You've probably been on your own for a little while and you're starting to get the hang of it (life, that is). Hopefully, you're making more money now and — after some trial and error — you're better at managing your finances.
But that doesn't mean you're exactly where you want to be. You still might be paying off student loans and credit card debt. That 401(k) is set up, yet, it still might not be at the level you'd hoped. But that's okay, says Daniel Sheehan, a financial planner based in Fresno, California. People in their 30s still have time to get their savings in line and start thinking about other things that felt less urgent earlier, such as writing a will and buying life insurance. "It's never too late," he says.
So, what should you aim for? Here are a few goals:
1. Kick your emergency savings into high gear. You may have started your emergency savings during your 20s, feeling comfortable with a few months' worth of expenses in the bank. But in your 30s, when you're probably earning more money and have more financial responsibilities — think kids or a mortgage — having an emergency fund is that much more important. For many workers, it'll be smart to have about six months' worth of expenses in the bank, advisers say. But the exact size of the fund will vary based on individual circumstances.
For instance, someone with unsteady income may need a bigger fund than someone with more predictable income. Likewise, someone with a mortgage might need more savings than someone with fewer financial commitments, says Scott Frank, founder of Stone Steps Financial. The point is that it might be harder to sell your furniture and move back with your parents if something goes wrong, especially if you're a parent yourself now. So save up.
2. Up your retirement savings to 15 percent of your pay. A good rule of thumb is to save close to 15 percent of your pay in a retirement account, including any match you might be getting from your employer, Sheehan says. If you weren't saving much in your 20s, however, you may want to save more than 15 percent to make up for that lost time, he says.
To get a better idea of how much you should save for retirement, you can go a step further. Your plan provider should offer online tools that project how much monthly income you might have, according to how much you're saving today. It's impossible to know whether that will be enough, but comparing it with how much money you have now and estimating how your expenses may change in retirement can give you an idea of whether you're on the right track, advisers say.
3. Start an investment portfolio. Once your emergency fund is set, try to avoid letting extra cash pile up in your bank account. Instead, invest that money to help it grow more quickly and give you a better chance of meeting your goals, be it saving for a down payment or for a wedding. Even if you aren't sure what you want to do with that money, creating a portfolio can still give your savings more room to grow until you know what you want to do with the funds, says Karen Carr, a financial planner with the Society of Grownups, a Boston-area company that offers financial planning and lessons for millennials. But having a specific goal in mind will help you better decide how the money should be invested, Carr says. For instance, if you want to save up for your child's tuition, you can invest in a 529 account, which offers tax benefits.
Your 30s are a good time to start building wealth outside of your house and your retirement account. Young people who mix up their investments by starting a stock portfolio or launching a small business, instead of focusing primarily on a house, can set themselves up for greater financial stability in the long run, says Bill Emmons, senior economic adviser at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. Using index funds is a simple way to invest broadly in the stock market while keeping costs low. Still, portfolios can also come with more risk. Advisers recommend against investing money in the market if you'll need it in the short term, or within five years.
4. Be (mostly) debt free. Hopefully you've made a dent in your student loans and paid off any outstanding credit card debt by now. But if you haven't, it's not too late to get serious about tackling that debt, Carr says. For credit cards, make extra payments on your highest-interest debt first, then use the payments that were going to that card to pay off your other cards, she says. Try to keep each card balance below 30 percent of the available credit limit, especially if you plan to apply for a loan. A balance above that threshold may ding your credit score.
Ideally, your 30s are a time when you are paying your credit card completely each month and just using credit cards to earn cash and rewards for flights, shopping discounts and other perks, Frank says. Try using your card to pay regular bills, such as your Internet or phone bill, then pay off the balance in full when your statement arrives, to avoid paying interest charges, he says.
Keeping your credit score up and your card balances low can also help you qualify for attractive rates on other loans, such as auto loans and mortgages, Frank says. It can also help with paying down student loans. Some people with large student debt loads may qualify to refinance those loans to a lower rate if they have good credit and steady work, Frank says. Financial start-ups such as SoFi offer this option, but more banks, including Citizens Bank and Wells Fargo, are also beginning to refinance student loans.
5. Write a will and prep other legal documents. Most people know they should get serious about writing a will after having children. But wills also become more important as you build your savings and assets, Sheehan says. If people don't explain who should get their savings when they die, the money may not go to the person intended, Sheehan says.
While you're at it, write up a health-care proxy that explains your medical wishes and who should make medical decisions in your place, advisers say. "Whatever it is that you want to accomplish, you need to make sure that it's documented," Sheehan says. As a rule of thumb, revisit the paperwork at least every five years, he says.
6. Get your insurance in line. Now is not the time to skip out on health insurance, but it's also not the only kind of coverage you might need at this point in your life. Find out whether your job offers short-term disability coverage, which would cover you if you became unable to work for several months because of an accident or medical condition. It's standard for policies to replace about 60 percent of your pay, so if that isn't enough to cover your bills, think about upping your savings or buying a supplemental disability policy.
Your 30s are also a time to think about life insurance, which would cover the people — be it a spouse, a child or a parent _who rely on you for financial support, Sheehan says. Some married couples may want to buy policies to make it so that the other spouse could continue to pay the bills, such as a mortgage, if one person died. But it typically isn't essential until children enter the picture, he says. And in couples where only one spouse is working, it should not be assumed that only the working spouse needs a policy, Sheehan says. A stay-at-home parent might also want to buy a life insurance policy for their child, since the surviving spouse might need to pay for child care — costs that can add up to tens of thousands of dollars per year.