How Much Money Should I Have Saved by Age 30?

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When it comes to savings, there's no one-size-fits-all answer for how much cash you need to set aside. In fact, financial advisors often offer conflicting advice.

Instead of searching for the "right" number, you can compare advice from multiple sources to come up with a solution that best suits you. To help you, we've gathered a few common recommendations on how much to save for retirement and emergencies, and some pointers for how to set and reach your savings goals.

How Much Money Should You Have in Retirement Savings by Age 30?

One popular rule of thumb, recommended by Fidelity Investments, is to aim for retirement savings equal to your annual pay by the time you reach age 30. So if you were earning the average income of an American 30-year-old, around $48,000 a year, you would aim to have $48,000 in retirement savings at the age of 30.

If that target seems impossible, consider other recommendations. Investment management company T. Rowe Price advises that a 30-year-old should have the equivalent of half of their annual income in retirement savings, and a 35-year-old should have an amount equal to their full annual income.

If you're not on track to reach those targets, try setting a more attainable goal to start with, like saving four months worth of your annual income by age 30. One way you can hit your target faster is by taking full advantage of your employer's 401(k) match.

How Much Should You Have in Your Emergency Fund?

An emergency savings fund is meant to help you deal with unexpected expenses. If you need a major car repair or you experience a medical emergency, you can use your emergency savings fund to cover the bill instead of taking out a loan, charging the expense to your credit card or, worse yet, tapping into retirement savings. If you lose your job, your emergency savings can help you stay afloat while you look for work.

Just like with retirement savings, advice on how much to save for emergencies varies a lot. Common recommendations range from saving three months' worth of your basic necessities up to six months' worth of your total living expenses. For most people, there's a huge difference between those two amounts.

So how much should you save? The right amount depends on a few factors, including your job stability and assets. If any of the following scenarios applies, you'll want to aim closer to saving six months' worth of living expenses for emergencies:

  • You have one or more people who are financially dependent on your income.
  • You earn income seasonally, or you're in an industry where work would be hard to find if you lost your job.
  • You regularly need medical services or medications that aren't covered by your insurance.
  • You own something that periodically needs repairs, like a home or vehicle.
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Consider a 50/30/20 Budget

A great way to work towards your savings targets is to set aside a percentage of your earnings every month toward those specific goals. The 50/30/20 rule offers a basic guideline for how much of your income to save. Here's a breakdown of how to apply the rule:

  • 50%: Necessities. Use half of your total take-home pay to cover your necessities. This category includes your rent or mortgage, utilities, groceries, prescriptions, minimum debt payments and the cost of transportation. If your necessities exceed 50% of your income, consider looking for ways to cut back on spending or increase your income (a second job or side gig, perhaps).
  • 30%: Discretionary spending. This category covers purchases for things you enjoy but don't necessarily need. Discretionary spending can include a combination of travel, dining out, gifts, recreation, clothing and entertainment.
  • 20%: Debt payments and savings. The remainder of your take-home pay should be split between extra payments towards your debt and regular contributions to your savings. You can further split savings amongst your emergency fund, retirement accounts and special funds for upcoming goals like a down payment on a car or a house.

The 50/30/20 rule isn't hard and fast. If your rent takes up nearly 50% of your take-home pay, you'll need to alter these percentages. Even if you're unable to save 20% of your income, you can choose a smaller amount and commit to saving that percentage consistently—you can always adjust later.

Tips for Reaching Your Savings Goals

Many of us dream of taking a big vacation or purchasing a home, but without a plan it's unlikely we'll save the cash we need for our goals. Here are a few ways you can get your savings on track:

Make It Automatic

One of the best ways to start building up your savings account is by automatically diverting a portion of each paycheck into your savings account, even if it's just $25. If you get a raise or pay off a debt, keep your cost of living the same and lump the extra cash into your savings deposit.

Cut Your Costs

If you find yourself running out of cash between paychecks, search for ways to decrease your expenses. When you review your budget, start by looking at your biggest expenses first, since reducing or eliminating them will make the biggest impact. Ask yourself, "Can I cut this cost, even just for a few months?"

Another great way to curb unnecessary spending is to review your credit card and bank statements. Look to see if there's a recurring cost you can cancel, a store you can stop shopping at or a service you can go without.

Earn Some Extra Cash

Cutting costs isn't the only way to make more room in your budget. For many people, an increase in income can create a lot more room in your budget than cutting back on expenses.

Can you take on a side job or a new job, or ask for a raise? Can you rent out a room or sell old equipment or instruments? The increase in cash doesn't have to be permanent, as long as it helps you jump-start your savings.

Start Saving Today

If you're behind on reaching these savings targets, don't throw in the towel on saving money.

Start by choosing a smaller, more attainable goal, like saving just a few hundred dollars and then working up to one month's rent. You can use a budget to plan and map out your savings progress. Even if you can't save a lot right away, the money you set aside will make you better equipped to deal with your next financial emergency.