The following is a guest post
By the time you reach your 30s, you should have already gotten a head start toward saving for retirement and for your children’s future. However, life doesn’t always happen as planned, especially when children enter the picture, our employment situation changes, or we’re hit with unexpected medical bills.
Here are eight steps 30-year-olds can take to better their future.
Determine what your ideal retirement looks like
The key to saving for retirement is steadily putting away money, cutting down on unnecessary costs, creating a sound investment plan, and getting the most out of your paycheck and benefits. But the first step any couple or individual in their 30s needs to take is determining what their ideal retirement looks like.
Would you like to live in a wealthy community, travel a bit and even help your children and grandchildren out? Make sure you plan accordingly. It’s no secret that you can’t rely on Social Security to support you through a comfortable retirement. In fact, Social Security benefits will only serve as padding to a well-planned retirement fund that has grown over the years.
Stay on top of your 401(k) contributions
The importance of getting as much out of your 401(k) as possible cannot be stressed enough. With an employer-sponsored fund, you can save up to $18,000 worth of tax-free contributions annually; in 2018, the maximum amount will rise to $18,500. And, looking forward to the future, people in their 50s can put away an additional $6,000 into 401(k) accounts.
Conventional wisdom suggests that you should be saving 10%–15% of your salary, especially when you move up the ladder and start earning a little extra.
Get cracking on a Roth IRA
For most of us, a 401(k) alone will not give us the ideal retirement we’re hoping for. In order to set yourself up for the future, invest as much as you can into a Roth IRA. Individuals under 50 can save up to $5,500 per year on this retirement plan.
As long as you’re younger than 59 1/2, you can withdraw contributions from your Roth IRA free of taxes and penalties in case an emergency pops up (though there may be a penalty and taxes on withdrawals of earnings). If you start saving at age 30 and retire at age 68 having invested the maximum $5,500 each year, you will have saved over $1 million from this fund alone.
Start a college fund for your kids
If you have children in your 20s or even your 30s, college is not as far away as it seems. Sure, financial aid can help your children finance their dream school, but you should still plan to save as much as possible to set them up for the future.
One way to maximize your educational savings is to invest in a state-sponsored 529 plan, which is designed to help people put away money for college. These plans allow parents to establish an account for their child, which they can use later to pay off their college expenses. Such funds help cover tuition and mandatory fees, with some plans helping you cover room and board as well.
Pay off your debt
This is a no-brainer: The more you owe, the more your debt will grow in the long run. If you have a mountain of debt that makes you anxious just thinking about it, don’t fret. Make a list of everything you owe, from credit card debt and lingering student loans to car payments and mortgage payments. Focus on staying on top of your monthly payments and each month’s added interest to prevent these from snowballing.
If you’re not sure where to start, tackle high-interest debt first in order to save that money for the future. Ideally, your 30s offer slightly more financial flexibility than your 20s, allowing you to simultaneously tackle debt and save for retirement in order to keep your finances in good standing both now and in the future.
Know how to ask for a raise
Many workers are afraid of being shot down when asking for a raise, even if it’s deserved and necessary considering the rising cost of living. If you’ve been plugging away at your job for a while, be honest with your boss regarding your goals, and be willing to take more responsibility in the workplace to improve your status at your company.
When asking for a raise, make sure you highlight your accomplishments and how you add value to your workplace. Instead of focusing on why you need a raise, clearly communicate why you deserve it. Pinpoint a specific sum by researching the average salary of someone in your industry with the same years of experience, and aim for that.
Keep an emergency fund handy
It may seem daunting to build up an emergency fund, but you can do it by adding a little bit to the fund every month until you feel that you have enough money to comfortably get you through an emergency, whether it’s a complicated medical situation or a job loss. With an emergency fund, you will have more financial flexibility to battle through the dry season.
Experts suggest that you should have between three and six months’ worth of minimum monthly expenses saved up for just-in-cases. And if that emergency does arise, don’t spend more than you have to, and focus on getting back on your feet as soon as possible by being proactive. Laid off? Go find that dream job and show them what you’re capable of—it’s never too late to start saving for the future.