There's a lot going on in your 30s, so it's a crucial decade to get your current finances in order and set yourself up for the future.
Buying a home, getting married, having kids, and changing jobs are all common life events for 30-somethings. Any one of those can be a big financial change. Combined? That’s a lot to navigate, especially as you look ahead to money goals like retirement or sending a child to college.
We’ve got three smart moves to help make sure your finances are in good shape by the time you turn 40.
If you’ve been steadily saving since your 20s, check your progress. Fidelity has recommended that by age 30, you should have retirement savings equivalent to your starting salary. By age 35, it suggests having two times your salary saved, and by age 40, three times your salary. Those are just guidelines, but they can help you gauge the importance of moves like boosting your 401(k) contributions.
If you‘re just starting to save at age 35, you’ll need to set aside at least 15% of your salary to be able to retire at 65 with financial security , according to data from the Center for Retirement Research at Boston College. That figure includes both your own contributions and any matching funds from your employer. You’ll need to save even more if you delay past 35, or if your goal is to retire before age 65.
You can assess your own financial situation using a a calculator like this one from Fidelity to determine how the money you’re putting aside now might grow over the next 30 years.
For example, let’s say you’re 35 years old earning a $50,000 salary, with $42,400 already in your 401(k). (That’s the average balance for people in their 30s.) If you contribute 10% of your pay with each paycheck (including the typical employer match of 3%), and see average annual returns of 6%, you’d have roughly $842,000 by age 65.
“I tell people in their 30s to plan for the worst and hope for the best,” says Shaun Melby, a certified financial planner and founder of Melby Wealth Management in Nashville. “You need six months of emergency savings , life and disability insurance, a living will, and a last will and testament.”
Work on getting those protections into place, if you haven’t already. Although you can complete some tasks online, like creating a basic will and buying life insurance, it’s worth consulting a professional. A financial advisor can help you figure out how much and what kind of life insurance you might want, for example, and an attorney can make sure your will follows state laws.
Another to-do: Update your beneficiary designations on your financial accounts. “When you first opened these accounts years ago, you might have identified a parent or sibling as your beneficiary,” says Sahil Vakil, founder and CEO of Myra Wealth in Jersey City. “Even if you name your spouse and child as the heir in your will, your financial account beneficiary will trump that.” Make a list of all your accounts and contact each institution to change the recipient if necessary.
Only 19.5% of older millennials—those age 30-37 — currently invest with a financial planner or advisor, according to a 2018 YCharts report . If you’re among those who don’t, it’s something to think about: “Between supporting your kids, paying off a mortgage, dealing with car payments , and perhaps tending to aging parents, you’re spinning a lot of plates,” Melby says. “Having a professional coach you through it all is worth its weight in gold.”
Seek out an advisor who is required to act in your best interests—in industry lingo, a fiduciary . Start with professional groups like XYPlanning Network and CFP Board , which have databases of fiduciary advisors you can search based on factors like location and specialty.
Ask questions about each candidate’s credentials, experience, and how they get paid . Some advisors are “fee only,” meaning you’re paying for their advice and time; others also get commissions for some of the products and investments they sell you. Check the advisors’ names in databases like BrokerCheck.FINRA.org to ensure they haven’t been disciplined for questionable conduct.
Then, set up meetings with several to see which is the best fit. “Find someone who communicates with you well, isn’t pushy, and explains things in a way you understand,” Melby says.
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