If the question is asked to you, “How much money should you save by the age of 30?” what would your answer be? Would you give a wide guess or do you know the exact amount that you should have saved by 30? The only problem is that it is tough to account for different personal factors like life expectancy, health and retirement lifestyle in the near future. This may even seem to be daunting enough for calculate for people who rarely understand how compound investment returns work and how they significantly grow with time.
Instead of confronting an impossible savings goal, there are many people who consider working through retirement a more viable option. 84% of millennials, 18 to 35 year old are of the opinion that they work throughout their retirement period either for gaining a source of passive income or to stay busy with some passionate work or to support their family. But since poor health conditions can mar you from working throughout your golden years, it is best to determine how much money you should save by the age of 30 so that you keep on increasing your savings graph.
Deducing the most vital goal – Adopting worthy financial habits
As per an eminent financial planner, the most vital goal that you have to achieve by the age of 30 is to develop a feasible plan for paying off debt, saving enough for your post-retired life and continuing to develop a portion of your income, (at least 10%) to save for retirement. The total amount that you should accumulate by the age of 30 should depend on the path of the career and how much money you invest in building the future earning power.
For example if you’re 30 years of age and you’re training yourself to become a doctor, chances are high that you haven’t saved enough money and rather you’ve taken on debt.
Paying down debt and saving enough in an emergency fund
How much money you must save by the age of 30 depends on different factors, as per financial planner and coach, Ryan Frailich. What is the standard of living in your location and how much money do you have to spend for your living costs? Are you married or single? What kind of debt load do you have and what is your long-term earning capability? What kind of family liabilities do you have?
However, there is one goal which everyone should meet by the age of 30 and that is having an emergency fund which contains expenses worth 3 months. This will form a cushion against any tough time when you may not be able to work. Make sure you get the most from your emergency account by keeping the funds stored in a savings account which helps you earn enough interest. Do some research on high-rate savings accounts before keeping your money in an account.
Savings goals that you should meet within a decade
Generally, financial analysts and experts say that the best way in which you may decide how much you should save by different age milestone is more of a percentage of the annual income. Suppose you’re 30 years of age, it is most likely that you have had 6 years of full-time experience at your workplace. If you’ve been saving 10% of what you had earned, then you should have saved something close to 60% of your present annual income by this point.
While some of these funds may be in an emergency fund, some others can be towards your workplace accounts like 401(k)s or IRAs. After 6 years, you would never fall below the savings amount that you’ve put in, rather you will always get a modest enough return.
There’s no magic savings number
Another financial analyst says that there is no such magic savings number that should be reached by a definite age. Instead you would require developing a realistic savings plan which will allow you to meet all your specific requirements. When you reach the age of 30, the most important thing to take into account is to keep your debt under control which means not carrying credit card balances or missed payments. Don’t splurge when it comes to big ticket items. For example don’t ever plan to buy a house which is not within your means.
Despite following all this, if you still think you’ve fallen behind on your savings goals, don’t feel disheartened. No matter what amount you’ve saved, at the age of 30, there are lots more that you can do to catch up with your peers. Whenever you get extra money, contribute towards your retirement account and pass any free money which you get from anywhere, towards repaying your debts. This way you will soon find yourself on the right financial track.