For your thirtieth birthday, do yourself a favor and sit down with your spouse for a financial assessment. While it is a good idea to see where you are each year and how you’ve progressed since the prior year, once a decade or so, it is a good idea to assess yourself not just against your past self, but against a more objective standard.
Take five minutes and see you you’re doing in some key financial areas:
A Home: At age 30, it is now time to buy a home. If you’ve done so already, congratulations. That puts you ahead of the pack. If you haven’t purchased a home, do you, have money ready for a down payment? You should be ready soon. If you get a significant portion of your down payment, saved, you’re in good shape and on track financially. If you don’t yet own a home and don’t have the money for a down payment, you’re a bit behind the curve. Getting into a home should be a priority for you over the next few years.
Credit Card Debt: You are at peak credit card spending age. You haven’t had a chance to build a big net worth. You don’t likely have lots of savings and so the temptation to acquire the stuff you want using a credit card feel overwhelming. If you are paying back your credit card balances each month, you’re ahead of the curve. If you have some small balances, totaling less than 10 percent of your annual household income, you’re in archetypal form for your age—work to emerge from your credit card debt as soon as possible. If your credit card debt has gotten away from you, you need to do fixing that situation your highest priority. It can overwhelm you financially and leave you perpetually struggling.
Retirement: Optimally, you’d have about half your annual income in retirement savings. If you do, you are on course for a retirement without worries and maybe even an early start to retirement. At your age, if you haven’t began to contribute to your retirement plan, you are taken. There are plenty of fiscal pressures on you now, but the money you contribute now will multiply about tenfold before you retire. Every year you wish to contribute will put greater pressure on your retirement savings later. Wait too long, and your retirement could really be impaired.
College Savings: If you have kids or plan to have kids, you need to be saving for their education. Presuming you have two young children, you should have several thousand dollars in the college fund already. You remember well how expensive college was and the cost is continuing to grow faster than the general inflation rate. If you give your kids to have the same opportunity you had to attend college, you’ll want to be saving. Paying for three or four kids to attend Ivy League schools could easily cost $1 million by the time they all finish. Just getting three or four kids through community college and a local four-year school will likely approach $100,000. If you are contributing about $58 per month for 18 years for each child, you should have the minimum required for the local state school college education.
Car: It is easy to focus on the sort of car you drive, the brand, the age, the model. Nothing could matter less to your financial future. The key is to drive a car you can afford to own without a loan. If you have a car payment now, promise yourself and your spouse that it will be the ultimate. Use your savings judiciously for car purchases, drive your cars for a long time and take good care of them so they last. By driving cheaper cars, driving them for a long time and avoiding interest charges on debt, you’ll save thousands and thousands of dollars over your lifetime that can better be invested in a home, college savings and retirement planning.
Don’t be discouraged. There is perhaps no time in life more frustrating financially than your early thirties. Your career likely hasn’t fully developed; if you own a home, it likely doesn’t seem to have a lot of equity in it, yet; your savings plans are likely ineffective and, perhaps, nonexistent. Don’t be discouraged by your situation; do what you can and if you’re patient, time will turn small investments into considerable savings, small home equity into substantial home equity and big debts into small ones.
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