Author: Tim Lemke / Source: Wise Bread
If you are exiting your 20s, you may be gallantly resisting the urge to “adult” and actually pay attention to your finances. But it’s time to get serious, people.
You don’t need to obsess over every detail of your money just because you are entering your fourth decade of life, but there are some key things you should have a handle on if you want to achieve financial freedom and retire on time.
Let’s examine these questions you should be able to answer by the time you turn 30.
1. What is your net worth?
Your net worth is the total sum of your assets minus your debts. By age 30, you should be focused on building that net worth to a healthy sum. This means boosting your income, investing well, and keeping debt to a low level.
It means knowing how much you’re putting into your 401(k) and other retirement accounts. It means knowing how much you owe. There’s no magic number for what your net worth should be at this stage, but it should definitely be in positive territory. If you have a negative net worth, work to reduce your debt load and start saving money more aggressively. (See also: 6 Money Moves to Make If Your Net Worth Is Negative)
2. What are you invested in?
By age 30, you should be investing as much money you can in stocks, with the intention of watching that money grow for the next three decades or more until you retire. Starting at age 30 will give you plenty of time to build a sizable nest egg, if you invest well.
At this stage, you may be throwing your money into whatever investments are offered by your employer’s retirement plan. But you should take time to know precisely how your money is being invested. Are your holdings comprised of low-cost investments with a track record of growth? Are you paying high fees or commissions? And when was the last time you rebalanced your portfolio? These are the questions you should be asking yourself now, and you ought to have good answers. (See also: 8 Steps to Starting a Retirement Plan in Your 30s)
3. How big is your emergency fund?
If you’re around 30 years old, you may feel like nothing seriously bad could happen to you. But life can come at anyone, and fast. At this point in your life, you should be putting some money aside for a rainy day. An emergency fund can help you absorb an unexpected expense, such as a medical emergency, big car repair, or a busted appliance. Opinions vary on how big an emergency fund should be, but you should ideally have at least three to six months’ worth…
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