Although there are some 22-year-olds who start investing in their 401(k)s and building up their savings as soon as they get their first paycheck, that’s not the reality for most of us. Our first few years out of college often involve changing jobs, partners, and even cities a few times until we find the right career fit.
By the time you’re in your thirties, you can no longer fall back on the “But I’m just out of college” excuse. It’s time to start thinking about how the financial decisions you make today will affect your future life and retirement goals.
If your employer offers matching 401(k) donations up to a certain percentage of your salary, you’re walking away from money if you don’t at least meet that minimum contribution. Start there and set your contributions to increase by 1% per year until you hit your maximum contribution level.
By increasing your contributions over time—especially if you time your increases with your annual raise—you’ll be able to painlessly work towards your retirement savings goals. Received a larger than expected salary hike? That’s a great time to give your contribution rate a bigger bump.
If you find that you are spending your entire paycheck each month and don’t have anything left over for savings, it’s time to take a close look at where you’re spending your money. Those happy hours, bachelorette parties, and Uber rides can add up over time.
A free tool like mint.com is an easy way to track your spending by category, and create a budget that can monitor your progress against your goals over time. Chances are after a month or two of expense tracking you’ll have a good idea of recurring expenses which can be curbed—and the money saved can be put aside for something more meaningful.
What would happen if you suddenly lost your job? How would you pay your rent and your other monthly expenses?
While some career fields have an exceptionally high demand—like software engineers—it’s more often the case that finding a new job may take you up to six months.
Using your monthly budget numbers, determine what your minimum monthly budget would be in such a scenario. Then, start saving up so you have that amount of cash in a savings account or other liquid investment you can quickly access in case of an emergency.
Those student loans you deferred aren’t going anywhere. Ditto for the credit card bills you racked up to move into your first apartment. While carrying some debt can be beneficial for your credit record—such as a mortgage or an auto loan—there isn’t a benefit to keeping most debt hanging around.
So, where should you start?
Oftentimes, student loans can be consolidated at a lower interest rate. Similarly, your high-interest credit card should be replaced by a lower rate card from your local credit union. Once you’ve stopped accumulating higher monthly interest, it’s time to start paying off a larger portion of the principal each month. That’s right—if you are only making the minimum monthly payments you won’t be making a dent in your debt.
It’s never too late to start investing in your future. And your thirties is a smart time to identify your goals and start laying the foundation for funding your future.