One of the most common questions I get from readers (and curious acquaintances) is how much money should I have saved by 30? (Or by 25, 22, etc.) Of course, it’s always seemed to me to be a silly question, because everybody has totally unique financial, lifestyle, and career situations. Still, everybody loves benchmarks, so let’s try to find some.
“How much money should you have saved by 30?” is a rather oversimplified question. After all, having $50,000 in a savings account and $100,000 in credit card debt is a much different situation than having zero debt and $500 saved. Looking at savings alone, anybody would rather have $50,000 than $500. But most (smart) people would rather have $500 and no debt than a negative $50,000 net worth.
That said, I think a fair goal by the age of 30 (for those of you who are fortunate enough to be planning in their twenties), is:
- No debt other than a mortgage and/or student loan debt. (That means no credit card debt, personal loans, or auto loans.)
- Three months worth of living expenses saved in an emergency fund in a liquid high yield savings account.
- A healthy retirement account. (For more about retirement savings, read: How much should be in your 401(k) at 30?)
Again, everybody is different, and age may not be the best milestone to use to compare your finances with your peers. (Still, people do). For example, somebody who spent most of their twenties in graduate or professional school may be just entering the workforce at 30. Somebody who has been working for twelve or eight years straight is obviously in a better position to have money stashed away by their 30th birthday.
When it comes to savings, the only absolute numbers you should focus on are specific savings goals (e.g. for a down payment, a new car, or a vacation) and your emergency fund. After that, you should simply save the biggest percentage of your income as you can muster, putting money first into retirement accounts like a 401(k) and Roth IRA. Then, what you do with your money is your decision. You can begin increasing your emergency fund, invest on your own, or pay down mortgage or student loan debt.