We recently discussed 5 Personal Finance Milestones in Your 20s, and today are following up with the next decade. Today we dive into the most important personal finance milestones of your 30s.
Buy a Home
While there are many circumstances where renting makes sense, owning your own home is a major milestone in your personal finances. When you buy a home, you stop paying someone else to live in their property and instead build equity in your own.
On the 20s milestones list, an important item to help help you with this goal was noted: saving a down payment. If you are able to save 20 percent of the purchase price of your target home, you should be in good position to qualify for a mortgage.
Keep in mind mortgage interest is an expense, just like rent, so if you are able to make extra or additional payments on your home loan, you can save yourself thousands of dollars in interest over the years.
Double Your Salary in Retirement Savings
A recent Marketwatch article caused a ruckus when it said you should have double your annual salary in retirement savings by the time you hit 35. Some readers felt this milestone is impossible. But it can be done and it is important.
Many people in their 50s and 60s have meager retirement savings. The Economic Policy Institute reports the average person in the 56-61 age bracket, those very close to retirement, is only $163,557. That means millions of households will likely struggle in retirement, if they can retire at all.
Dont become part of that statistic. If you are far off from double your annual salary in your retirement accounts, its time to pick things up. Save at least 15 percent to maintain the same quality of living in retirement you enjoy in your working years.
Lock in Term Life Insurance
Life insurance costs go up as you get older and new health conditions emerge. So if you didnt get term life insurance in your 20s, its time to get on it.
Term life insurance is the cheapest way to get the best level of protection for your family in the event of a worst case scenario. If your income were to suddenly stop, would your family be able to cope without your there? If not, you need life insurance.
Get a free quote at SelectQuote in just a few minutes to find out what term life insurance costs from leading insurance companies with one easy form.
Reach Debt Freedom (Outside of a Mortgage)
If you are still carrying student loan balances, you are far from alone. Many people well into their 40s still carry the burden of student debt. But as a financially minded individual, you are not like those people. You can get your debt paid off for good.
Outside of a mortgage, you should strive to reach complete debt freedom in your 30s. That means student loans, credit cards, auto loans and any other type of borrowing other than a home loan.
Getting those debts paid off can save you a small fortune in interest. Those are dollars that you can keep to afford a better home, boost your savings, and ensure you are on track for all of your financial goals.
Fix Your Credit
Do you have bad credit from a string of late or missed payments in your 20s? Thats okay, it happens. But by the end of your 30s, you should be able to achieve good or better credit. Getting excellent credit is simple, but it takes consistency to make it work.
Starting today, commit to making all credit and loan payments early or on time. That, combined with low balances on revolving debt such as credit cards, makes up more than half of your credit score.
If you dont know your credit situation, start by getting your free, government mandated credit report at annualcreditreport.com. Then get your free credit score from a site like Credit Karma or Credit Sesame, if you cant already get it from your bank. With the information there, you can get yourself on track for a strong credit score.
Get a Will
While no one likes to think about dying, it is important to be prepared. In addition to term life insurance, that means setting up a plan for what happens if you do kick the bucket before you reach old age.
A will should include information on what happens to your money, other assets and kids (if you have them) when you and/or your spouse pass away.
You may be able to complete your will online, but every state has different rules, requirements, and regulations, so it is best if you can work with an experienced and qualified attorney to make sure your will is high quality and enforceable.
Optimize All Insurance
Auto and other insurance rates tend to creep up. And your needs might have changed since you first bought your homeowners or auto policy. It is a good idea to review your insurance every few years to make sure everything is in line with your current needs.
By the end of your 30s, you may have big opportunities to save on insurance due to marriage, a safe driving record and other possible discounts. Even if you are happy with your current insurance, you might be able to save a bundle getting a similar policy at a new insurer.
SelectQuote Auto and Home is available to make that process easier if you need any help.
Use Your 30s for Financial Stability
In your 20s, you should start getting your finances in order and chipping away at the biggest goals. By the end of your 30s, you should be well on your way to retirement and other important financial goals with a firm foundation beneath your feet.
If you dont have one already, make sure to save up an emergency fund. If you can do that and the other milestones on this list, you should be on track for lifelong financial success.