by Hadley Davison
As we have continued to grow our knowledge of finance and how to apply this knowledge to our lives, there are certain mile markers that are suggested we reach in order to help us achieve our greatest financial goals. Of the many financial strides you should be making as a young adult, there are specific money milestones that you should meet before you reach the age of 30. These milestones include: building an emergency fund, establishing a retirement fund, and establishing a good credit score.
By the age 30, you are most likely to have sprouted your career and gotten your finances set and in order. Throughout your college years and early twenties you should have implemented your goals for your future finances which will allow you to financially grow the most within your later years. These goals should include the three milestones previously listed in order for you to set your financial needs in order.
First, you will want to ensure that you have an emergency fund set and stone. According to Ally: Do it Right, an ideal emergency fund should hold three to six months worth of expenses. This fund should be held in a place that will have easy access to the cash for when life throws you those curveballs. On average, the typical 25-30 year old will spend about $4,700 on monthly expenses. This means that based on this spending, an average 25 year old should have about $14,000 saved up in their emergency fund. However, most young people push off the idea of an emergency fund as they don’t picture the need for one in the near future. The issue with this is that although you may not see the need for an emergency fund, there are always moments in life that you are not prepared for and by beginning to add to this fund before you are 30 will help save you the stress when something unexpected gets thrown your way.
The second milestone is building your retirement fund. Although you may not see a need to start adding to your retirement fund as you have most likely just begun your career, it is something that can greatly benefit you once you retire. Similar to the emergency fund, most 20-30 year olds don’t see the need in this fund until it becomes too late to actually have a decent amount of money saved up - which is where people run into problems. If you look at the chart provided by Vanguard, you can see the importance of starting to save your money in a retirement fund sooner rather than later - or any form of savings for that matter.
Lastly, the third recommended milestone that you reach before turning 30 is to establish a strong credit score. We just recently learned the importance of a good credit score in class, so we should all understand the importance of having a good credit score. The higher your score, the easier it becomes for you to borrow money for loans, mortgages, and personal use. You can achieve a good credit score by paying off debt, not missing bill/debt payments, and working to make smart and educated financial decisions. If you have a high credit score by the age of 30, and make it a goal of yours to achieve a certain high number by that age, you have already set yourself up to maintain that score and work to better it for future use.
In the end, it is important to not only note that you should have your financial goals set and in order, but you should also make sure that you are achieving the correct goals within the correct amount of time in order to make the most of your money and limit the amount of future stress and issues that may come if you do not follow these three recommended money milestones.
Works Cited
Backman, Maurie. “3 Money Milestones to Hit by Age 30.” The Ascent, The Ascent, 20 Apr. 2020, www.fool.com/the-ascent/banks/articles/4-money-milestones-to-hit-by-age-30/.
“Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond.” Do It Right, 20 Aug. 2020, www.ally.com/do-it-right/money/savings-by-age-how-much-to-save-in-your-20s-30s-40s-and-beyond/.
“When Should You Start Saving for Retirement?” Vanguard, investor.vanguard.com/retirement/savings/when-to-start.
I think you did a good job touching on all of the things people can do to prepare themselves for the future. These are things that I think are equally important and something that everyone should pay attention too.
ReplyDeleteI know both of us have similar career interests, so I'm wondering how our path through medical school will affect us. Obviously, we will have more years of schooling than the average person, so do you think this would be an acceptable reason to not be as financially prepared as the average 30 year old - or is this no excuse? The average resident makes about 60,000/year, but is almost constantly working. Do you think all of this would be achievable for us? Or would we have to work around this and catch up later in life when our official salaries begin after residency?
ReplyDeleteBeneficially, I could use this blog a lot to help myself out in the future, as many important sentences in here that you have put, made me pay more attention to it. Goals are a huge need for me, as I would liek to learn more about financial needs.
ReplyDeleteAll of your advice probably doesn’t surprise anyone, but it’s good to reiterate. I was surprised that 25 year olds spend $4,700 per month, I thought that number would be a lot lower. Out of those, which do you think the most important one is? I would think building a retirement fund and investing would be the most important, as that way you are accumulating more wealth down the line. Having a high credit score might be too, as you will probably have to take out big loans in your 30s like a house or car payment.
ReplyDeleteI think you did a super good job writing this post to inform readers on what they should do for the future, but not forcing it upon them. Also, I've always wondered how much I should have in an emergency fund but have never took it upon myself to look it up. Your blog post answered this question and has made me more knowledgeable on the important of having a good credit score, having an emergency fund, and starting early on a retirement fund. Good job writing this simple yet super informative blog post!
ReplyDeleteThis is very insightful, I understand that a lot of young people ages 20-30 don't see the need to be saving for things that don't really affect them now. So it's good to know that you should be doing that. I think having an emergency fund is super important, and I like how you gave us a number of how much money we should have in those accounts, just in case we were to lose our jobs we would at least 3 months worth of money to get by with until we could find a new job. I think that's a super good idea. Great work!!!
ReplyDeleteI like this blog post a lot because it shows how much money you earn compared to your age. This helps me want to start thinking about my future earlier than later. Good Job!
ReplyDeleteThis is a great blog post Hadley! It's super insightful and relevant. I 100% agree with everything you said. What do you think is the most important recommendation? I think for sure it is credit score for me. With credit score it opens up a lot of good opportunities.
ReplyDeleteI find it interesting that your blog made it a goal for age 30, and not just retirement. Most financial goals are just needing enough money for when you stop working. But also having the goal of an emergency fund and good credit score by age 30 can be easily overlooked. Setting smaller goals along the way can help condition someone for that big goal of retirement.
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