It’s easy to imagine you’ll have it all figured out financially by the time you’re 40. But you only need to look at the stats out there to know that’s not the case for most Americans.
The median retirement savings of families headed by people between the ages of 38 and 43 is just $4,200. While some people have saved much more, many have nothing saved at all for retirement, says the Economic Policy Institute. Even more worrisome, a GoBankingRates survey found at least 35 percent of those between the ages of 35 and 54 don’t have any money in a savings account.
No one wants to end up there—especially since by then, many people are raising families, maintaining homes and inching ever closer to retirement. “They are in the middle of the ocean, really busy with all their financial goals,” says Certified Financial Planner Vid Ponnapalli. “To survive, they should have taken care of a few things by the time they hit 40.”
The good news? You don’t need to do much in your 30s to make sure you’re on the right track. Start here:
You know the drill: In case of emergencies, you need enough cash on hand to cover three to six months’ worth of expenses. But has your monthly budget changed over the past decade? Probably—especially if you’ve gotten married, bought a home, had kids or made other big life changes. Run those numbers again, and make sure your emergency fund is still stocked.
Now that you’ve been in the workforce for awhile, you might have left behind a few jobs—and retirement plans. Track down old accounts and consider rolling over funds to a new 401(k) or IRA, which can give you more flexibility in how you invest that money.
Fidelity offers a roadmap that suggests putting away the equivalent of one year’s salary by 30 and three times a year’s salary by 40. If you’re nowhere close to that, now’s the time to start inching up your savings.
Ponnapalli recommends working toward a savings rate of 25 to 35 percent of your annual income, including your retirement contributions, and deposits into your savings and any investment accounts.
If you have kids (or plan to), Bartelt strongly recommends life insurance—“enough so that your survivors will have money to pay for whatever you think is important,” she says. “That [could] include enough to pay off the mortgage, send kids to college and provide monthly living expenses for a little while.”
Other coverage you may need: renter’s or homeowner’s insurance, long-term disability, an umbrella liability policy and long-term care, if you’ll support elderly parents.
It’s not just an interview question—you really should know where you see yourself in 10 years. Maybe it’s in the same job with higher pay, starting your own business or something else entirely. Whatever it is, be intentional, says Certified Financial Planner Meg Bartelt. “Your professional success has a huge influence on your financial success.”