1. Max out your 401(k)Contributing to your 401(k) is one of the best money moves you can make, regardless of your age (in fact, the earlier you start saving, the longer compound interest has to work its magic). Between longer lifespans, uncertain social programs, and growing healthcare costs, you’ll probably need to save much more than your parents did. Some experts recommend putting aside 10% of your paycheck, but most agree that 15-20% should be the minimum. You can make the process easier by setting up automatic contributions to your retirement plan. Not only do you avoid hassles, but it’s well documented that you don’t miss money you don’t see. By automatically contributing 15% of your paycheck or more intoyour 401(k) account, you’ll be setting yourself up for a financially secure retirement.
2. Protect yourself with a will and insuranceStuff happens. Financial planner and freelance journalist, Roger Wohlner of the Chicago Financial Planner stresses that if you’re in your 30’s and have someone who depends upon your income (like a spouse, child or aging parent), then you should seriously consider low-cost term life insurance in case you’re not around to provide financial support. You should also look into disability insurance if your employer doesn’t offer it, or if your state doesn’t have automatic protections for those unable to work. You also need a will. Remember, you’re building up a hefty nest egg, possibly buying a home and growing your net worth. In case the worst happens, you can save your loved ones money and peace of mind by writing a quick, free last will (California’s state bar provides a template).
3. Have the “money talk” with your partnerMany people in their 30’s start combining their lives with a partner’s, whether that means moving in together, getting married, or having children. Merging finances is a touchy subject in relationships, but it’s an important one to discuss. Some of the key talking points are:
- Can you afford your must-haves with your current incomes? If not, how will you increase your income or cut down on spending?
- How much money should be allocated to discretionary spending? Does it make either of you uncomfortable if one person spends more than the other? If you want to splurge on something above, say, $100, would your partner like you to check in?
- Who will be responsible for money management? You don’t have to put the burden entirely on one person, but assigning final responsibility to various money tasks ensures nothing falls through the cracks.
- What are your savings goals? Do you want to set aside money for a home, your kids’ education, or a family member in need of support? How will that impact your budget?
- Is either of you likely to experience a drop in income? For example, does one of you plan to take a lower-paying job or become a homemaker? If so, how will your spending need to change?
- Does one person have more debt than the other? How do you want to allocate your incomes in paying off that debt? How do you and your partner feel about the arrangement?
4. Raise your career profile and explore side gigsTake charge of your career to maximize your salary today. If you make $75,000 at age 35 and get a 3% raise each year, you’ll end up with a salary of $135,400 at age 55. Unfortunately, that 3% raise sounds a lot less exciting when you account for inflation. Assuming a 1.5% inflation rate (which is less than this decade’s average), your $135,400 salary would be worth just $87,041 in today’s dollars. Rather than relying on salary increases, actively work to boost your skill sets: Take a class or two, negotiate for a higher salary, and consider getting a graduate degree if that leads to higher wages. It sounds obvious, but future salaries are based in no small part on previous salaries, so building your current salary now will have an even bigger impact on your salary down the line. There are other ways to boost your income. Add on a side hustle, like freelancing or driving for ridesharing services, and put a little extra money away towards your savings goals.
5. Be prepared to care for an aging parentIn the future, you might be responsible for your parents’ care – or you might already be. Even if your parent has saved some money for retirement (and many haven’t), the rising costs of health care and housing may mean you’ll have to provide some financial support. Here are some ways to prepare yourself and your parent:
- Make sure both of you are managing your money wisely. This means contributing as much as you can to your 401(k) (in fact, people over 55 have higher contribution limits), finding low-fee, high-performance investments, and creating a budget that accounts for your saving goals.
- Establish power of attorney. In the case that your parent starts losing cognitive function, you’ll want to make sure that he or she won’t accidentally go on a spending binge or fall victim to a scam. Creating a power of attorney puts you in a place to take care of your parent. Power of attorney can only be given if the grantee (that is, your parent) is in his or her right mind – if that’s not the case, you can apply for a conservatorship, which is more expensive and can involve going to court.
- Get your tax credits. Tax breaks available to seniors and their caregivers range from deducting medical expenses to a higher standard deduction.
- Know your rights. You may be covered by the Family Medical Leave Act, which empowers some employees to take unpaid, job-protected leave to take care of a family member with a serious health condition. Your parent may also be eligible for disability leave (if he or she plans to return to work).
- Seek help for medical bills. Many hospitals offer payment plans to patients (and their families) who are spread thin, and there are nonprofits who will help lower or pay for medical costs.
- Consider selling off assets. As a last resort, you can consider borrowing against or selling assets. For example, your parent can take out a reverse mortgage, which allows seniors to essentially get installment payments in exchange for home equity. It may not be the ideal outcome, but it can help you in a pinch. You can also sell their life insurance policy or consider an annuity.
- Make your dollar stretch further. This may include lowering the cost of care or getting long-term care insurance.