I’ve covered personal finance goals for your twenties over and over (like a broken record). Despite the name of this site, I’ve discovered that there is a contingency of all age groups who frequent and contribute to the site. So, we’re going to hit a different group on this post. However, it should still be highly relevant to those in their twenties looking ahead towards future financial goals.
So what are some realistic and strategic goals once you reach 30? I’ve been thinking about this a lot lately. The thirties are an interesting time period. Ideally, you start to advance in your career and begin hitting your peak earning years, you may have a house, start a family, and you generally have a completely different set of financial goals than when you do in your twenties.
Much like I did on my twenties post, I’ll cover some basic goals along with goals that would win you extra points. Remember, these are goals to strive for, they won’t be hit by everyone.
1. Retirement: Max Out your 401K
I’ve max out my 401K for the last few years and plan on doing it every year in my thirties. Why max it out? Well, for starters, if you’ve been doing it already, you know what it takes and should have no problem doing it as your income continues to grow. If you haven’t been, your thirties might begin to provide enough of an income for you to consider it. Don’t wait until your 40’s to start savings significantly for retirement. By then, it might be too late to use the power of compounding capital gains to have a huge impact by retirement.
Not sure what the IRS maximum 401K contribution is? Click that link to find out.
- Bonus Points: Starting to contribute to your IRA in your twenties should be a goal. In your thirties, there’s more at stake. In addition to maxing out your 401K, also try to hit your IRA maximum contributions by maxing out your traditional or Roth IRA.
2. Debt: Pay Off All Non-Mortgage Debt
This would include credit cards, auto, and other high-interest unsecured loans as well as student debt. High-interest loans are the equivalent of a dam that’s about to break. It’s starts off as a little drip and as time goes by it turns into a steady stream and finally, it breaks down the wall altogether.
- Bonus Points: Pay off your mortgage. Carrying significant mortgage debt into your forties and fifties leads to you being very dependent on your primary source of income to keep the house, most notably, your day-job. As we all know, hardship can happen anytime. Having to foreclose on a house at that stage of life makes recovery for a comfortable retirement very difficult.
3. Emergency Savings: Maintain an Emergency Fund Equal to One Year’s Worth of Living Expenses
In a span of ten years, the country will probably going to go through an economic recession or two. In such times (and even outside of them), you or your significant other may be at risk of losing your job. You also may become more prone to disease or other medical hardship as you age. When my wife was laid off last year, our emergency savings fund helped save the day. Protecting your future goes a long ways towards peace of mind.
A lot of financial gurus recommend six months worth of emergency savings, but after this recession, I’d feel a lot more comfortable with a year.
- Bonus Points: Earn interest on your emergency fund through a high-yield free checking account online.
4. Protect: Protect your Loved Ones with Term-Life Insurance
A lot of us will continue or begin long-term relationships and possibly start families in our thirties. If someone you know is even partially dependent upon your income to live comfortably, then you should be taking a look at covering yourself with a term life insurance policy. Term life insurance is the ‘discount broker’ of life insurance – you cut down on fees and pay for only what you need.
- Bonus Points: Acquire long-term disability insurance as well.
5. Protect your Legacy: Fulfill your Legal Obligations to Others
Create and maintain a living will, living trust, durable power of attorney, and a will. If you are to become medically incapacitated or pass away, these legal documents can protect your loved ones on a financial and emotional level. You owe it to them.
You can go through an attorney to complete these legal documents, but that can be costly, particularly if you frequently update them. I’d recommend checking out Quicken’s WillMaker Plus, which has fill-in-the blank templates for all four documents and many other legal documents that you might find useful.
- Bonus Points: Don’t die in your thirties. Oh, that’s just wrong, isn’t it? Have a little sense of humor!
Personal Finance Goals for your Thirties Discussion:
- What goals did you create/complete while in your thirties?
- If you’re in your twenties are you a step ahead on completing some of these goals?
- What financial goals do you have for your thirties?
I would add, don’t let others pressure you into financial decisions that everyone is “supposed” to have or do – my partner and I are 30 years old and have made the decision never to buy a home or to raise children. We get a surprising amount of flak for this, but we’ve given it a lot of thought so we don’t feel like we have to respond to other people’s expectations.
I should finish paying off my credit cards this year (under $2K at this point, hooray!) and then will be adding to my emergency fund aggressively (currently $4500 in an ING savings account, I make $40k/year) and hopefully starting an IRA in 2011. I work for the state so participation in a 403(b) is mandatory, though I am on a vesting schedule for their contributions, I get all the match after working here for 3 years – 2 years as of this summer, 1 to go! I have one large (~$92K) consolidated student loan and one small (~$6.5K) unconsolidated student loan, so I also want to pay off the small one because the interest rate sucks (6.8%) and also to simplify things so I only have one monthly payment. I’d love to pay off my loans entirely by the time I’m 40 but that’s VERY aggressive…
I have short- and long-term disability through my work as well as supplemental short- and long-term disability through the same company I get my life insurance from. I will also be looking into long-term care insurance within the next year (there is some pretty nasty stuff running in my family, other people might not be as concerned about this).
One year’s-worth of expenses saved up? How does one even begin to save that much money?
A dollar at a time.
My goals by the time I hit 30:
Pay off house mortgage and student loans.
Have enough saved to go jobless for 6 months.
Travel to Europe once :D
Question about savings rates: at 1.095% is ING still considered high yield? I know everything is low now, but that seems pretty low.
I am a big fan of maxing out a Roth IRA first if you are eligible to do so before maxing out a 401-k assuming that your employer does not match your contributions. The tax advantage for me is much greater to pay taxes now than later in life when my tax rate will be higher. After maxing out a Roth IRA, then go back and add money to a 401-k…unless your employer matches, then do that first. It’s free money.
I love that you wrote about looking at the next steps before you get there. I’m 26 and paid off over 100k in debt a little over a year ago. I was so focused on that goal that once I got done I had no idea what I wanted to do with all the money I had been putting towards the debt. I already had a year’s worth of emergency fund and was already maxing out my 401k (I earn too much for IRA’s) so I started reading up on what the next steps are and thinking about what I wanted in life.
Children were the next big expense we could forsee so now my husband and I have a “baby fund” as well as a “college fund” that we have been regularly contributing to since December of 2008. Now when it comes time to buy all those diapers, we’re prepared!
Jessica, you don’t earn too much for an IRA! There is currently a loop-hole in the law that will allow you to contribute to a ROTH IRA. Here’s how: You should make a (2009 year) contribution to a non-deductible traditional IRA (this will be with post-tax dollars as I am assuming you make too much and have a company-sponsored retirement plan to qualify for a deductible traditional IRA). Then immediately convert (report this on 2010 taxes) the Traditional IRA to a ROTH IRA. There will be no tax implications since you funded the traditional with post-tax dollars, but you get the long-term benefit of tax-free growth in a ROTH.
Of course, this would all be much easier if Congress removed the antiquated earnings ceiling on ROTH contributions. I just did this yesterday, by the way.
My husband and I are a few years away from 30, but we’ve already started on some of these goals:
1) We contribute 6% to my 401k since it’s matched up to 6%. We also have fully funded a Roth IRA for the last few years. Our goal for this year is to fully fund another Roth IRA. I’ll look into increasing my 401k contributions once we are successfully funding two Roth IRAs every January.
2) We have one car loan and a mortgage but no other debt. They are both on track to be paid off early, but we’re attacking the car loan with gusto (even though it’s at 4.6% while the mortgage is at 5.375%…it’s more annoying to me). The car loan will be paid off when we’re 28 and the house will be paid off by the time we’re 34.
3) We only have 3-4 months of expenses in emergency savings since we both work in very stable jobs, have no kids, and can live off of one salary. If any of that changes, we’ll be sure to increase our emergency fund.
4) I pay about $25 a month through my company for a $100,000 life insurance policy, short-term disability, and long-term disability. $100,000 would be enough to pay off the house, car, and cremation expenses. My husband will also be getting all three policies this summer.
5) We haven’t made a will yet, but we have no kids and everything is in joint accounts. I will look into this again every few years.
Thanks for the great goals! I like looking ahead.
You start by adding a set amount into the emergency fund each month and increase that amount when you can. Even if you simply start with $50, that’s a beginning. My husband and I are a teacher and an office worker respectively, but we save about 40%-45% of our joint income every month. You can take a look at our budget on my blog, but saving up a one year emergency fund is not an intangible goal.
Yes, 1% stinks…even the 2% you can get at Smarty Pig right now is not that great. But the point is having cash on hand. You might want to look at credit unions in yours area since many have rewards checking (3%-4%). First Community Credit Union is near me in Harris County, TX and is curently at 3.6%…but I’ve heard of quite a few. Google credit unions near you and then take a look at their websites…that’s how I found First Community.
@ Honey – Agreed. If I had a dime everyone asked me when I’m having kids….Sounds like you have a good amount of work ahead, but you have a plan.
@ Joe – Live like a min. wage worker on your lawyer wages for a year. The key is in budgeting and living below your means. It’s really not unrealistic at all, in my opinion. I don’t live in CA, however.
@ Smarter Spend – like how you worked a fun goal in there as well. That’s important too.
@ Stephanie – yeah, Ing is a little lower at the moment. Generally, between those three you’ll find one that is near or at the industry high for savings yields. You might be able to get a higher rate locally, or at a lesser known online bank, but you usually have to jump through a lot of hoops to get it (i.e. direct deposit, 30 transactions, 2 checks, smile at 25 strangers per day, etc.).
@ Jessica – Wow, paying off $100K in debt by 26? Doctor, lawyer, or investment banker? That’s impressive. BTW, Holy Kemp is correct.
@ Holy Kemp – good advice.
@ Budgeting – Sounds like a great plan. You might want to look into a term life plan outside of work, if you haven’t. I was able to get a $250K plan for $10/mo. I realize yours has disability as well, but if you’re looking for more insurance, it might be cheaper elsewhere.
Homeowners: anyone ever compare and decide between a mortgage payoff policy to a term life insurance policy? The premiums are lower for a mortgage payoff policy because as you pay off your mortgage the principal amount (the amount insured) is decreasing. But, for at least half of the mortgage term, the vast majority of mortgage payments represent interest, so the principal amount (insured amount) remains relatively high. I suppose this becomes a scenario-driven time value of money situation. Time to open up Excel…
Goal #6, become a millionaire.
I think you are right..
HI…well i would like to say every one has got there own targets and how to achieve their targets different ways if we will by the house and would pay the morgage rather then that we would pay a rent so no difference but their is house is ours by the end but rented would never belonges to us think about it and secure your future.
Thanks! I’m actually none of the above! I’m an aerospace engineer. I “got lucky” and jumped on the opportunity to became a consultant about 3 years into my career making six figures. It was risky but with big risk comes great reward, especially in this case. Now, if only I would have gone to a less expensive school to begin with, I could have been investing all of those payments I was making to Sallie Mae *sigh*… then again I may not have had the same opportunities had I gone to school somewhere else.
I have heard of the IRA conversion loophole but something about it just didn’t sit right with me when I heard about it. I may have to look into that a little deeper though!
What great advice. If people take the advice here they will be happy campers in a few years. One point I would like to make about your 401K. How you invest can be as important as how much you invest. From an article I wrote “What every High School student should know about investing”
“Just as an example assumes that 20 years ago you invested ten thousand dollars in the Gabelli Mathers Fund it would be worth just over thirteen thousand today. If you invested in the Gabelli Asset Fund it would be worth almost seventy thousand.”
Just stumbled across this article, and it looks like a good place to start. I’m in my mid-thirties now, and looking forward to accomplishing many of these goals (don’t know if I’ll get through the mortgage by the end!!)
Some additional thoughts: If you have kids, you should begin funding college education accounts. I recommend starting with Coverdell accounts because of the greater flexibility, but they only allow 2K/year per child. 529s can be good as well.
What about trying to generate some income outside of a day job? There are plenty of ways to do it, but as your wage income is generating a surplus it’s a great time to figure out the best way to make that surplus work for you.
Haha! Paying off $100K in debt by 26 as a doctor?!? Yeah, right. I won’t be done with my training and earning a substantial paycheck until I’m in my mid-30s…right now I earn in the high-40s working 80-90 hours/week.
25 here, and wife is 23. By spring we should have all of our debt’s paid off (credit card, medical bills, etc.) And will be working hard on aggressively investing in my Roth IRA, and building an emergency fund.
I heard some advice, that I have decided to follow – contribute enough to your 401(k) to get all of your employer’s match (6% in my case) then focus the rest on a IRA. To start with, we’ll be putting $200/month into the IRA, but hope to push it further as we re-adjust to living on less.
With a year and a half old kid, and another on the way, and having been out of work for 3 months on top of the medical bills for knee surgery, I have learned first-hand the importance of building an emergency fund. I couldn’t picture being overly comfortable on 3-6 months of income set aside though. Call me cautious, but I’d like to see a solid year set aside… Now, to figure out how to make that happen… Hmm…
By the age of 30 the minimal savings you should have upwards to $20k with no debits :)
Back in 2006, I thought long and hard about my future. I came up with the following:
I want to be happy and healthy, and my family to be happy and healthy too
I wanted financial independence
I wanted to be able to work when I wanted to work, anywhere in the world
The dream building took a few weeks – visualising what my life would look and feel like once the dream was realised.
Initially I didn’t share this dream with anyone – I wanted to achieve it by stealth – quietly beavering away in the background. Although you might just want to share your dream with your partner!?
Once happy with my vision, I set myself some goals:
Within 5 years (2011) I would have paid of my mortgage and cleared all my debt (note: I never did pay off my mortgage but used the money to invest elsewhere – but that’s another story for another day)
Within 10 years (2016) I would have completed my career in the rat-race, be working for myself, and have assets worth £1.5m
In 15 years (2021) I will be rich with total assets of £4m
I got myself a special note pad and started to right everything down, to log my progress. I also sketched a drawing (and I can’t even draw) of what my dream would like. I believe this was key to visualise what success looked like.
Every day I thought about by dream, my goals, and how I could take one step closer. I vowed never to give up on my dream.
Strange as it may sound, I even took advice from Napoleon Hill’s ‘Think and Grow Rich’ and imagined a ‘master mind’ team. This virtual team consisted of eight influential people in my life. Some of these people were unfortunately no longer with me, some were still alive. Some of them I knew very well, some of them were famous and I’d never met.
Every night in bed, before I fall asleep, I imagine this ‘master mind’ team sitting around a table in a memorable house. A sort of meeting. I speak to them in my mind, and ask for their advice – especially around key life decisions. It’s become a sort of meditation, a sort of prayer (note: I’m not religious). I hope, in some funny way, this master mind team are now guiding me towards my dream. Am I barking??
All these dreams, thoughts, goals, progress updates, went into my note book. I thought about them daily. I recited my goals to myself daily. It became a sort of mission – I became obsessed!
Before you set out on your journey, I strongly advise you think hard about your dream and goals. Write them down, visualise them, draw them. But share with as few people as possible – they’ll think you’re mad! And be careful what you wish for – it may just come true!
So remember: “without a dream – how can your dream come true?”
Onwards and upwards.
Sov, just outside the big smoke, London