5 Financial Moves to Make Before Turning 30 (though it's never too late!)

We all have different life goals, but everyone wants financial security, especially with regard to retirement. When you’re in your 20s, turning 30 may seem a long way off, making it easy to procrastinate on getting your finances together. But before you hit that milestone, you’ll want to make sure your personal finances are off to a good start.

To ensure you enter your 30s on the right track with your money, consider these five expert-recommended moves before you blow out your birthday candles.

Contribute Regularly to a Retirement Account

When you’re young, it can be hard to even imagine retirement. But “time is only your friend if you start preparing for retirement now,” says Roslyn Lash, a financial educator and coach at Youth Smart Financial Educational Services in Winston-Salem, N.C. Your 20s are the best time to start contributing to an IRA or 401(k) because you can harness the power of compounding – earning returns on your returns. In addition, “the earlier you start investing, the more you will be able to handle the fluctuations of the market that may occur,” Lash says.

So how much should you have saved for retirement by age 30? “By age 30, the balance in your 401(k) should be equal to at least half of your current annual salary,” says Steve Branton, a certified financial planner and senior financial planner at Mosaic Financial Partners in San Francisco. If you haven’t reached that milestone yet, it’s time to increase your monthly retirement contribution, Branton says. And make sure to take advantage of any employer matches, since it’s free money.

Stockpile Emergency Savings

If you’re not prepared for a financial emergency such as a broken-down car, a lost job or an unexpected health issue, you may be forced to rely on credit cards or expensive payday loans. Building up savings throughout your 20s makes it more likely that you’ll hit 30 with a buffer so you can handle emergencies without going into debt.

A good rule of thumb is to have three months of living expenses saved by the time you turn 30, Branton says. Lash says that it’s better to have eight months of emergency savings, if possible, and that the ideal savings rate is 15% of your net income. If that’s not possible for you, she suggests simply starting with a goal of setting aside $1,000.

This account should be for emergencies only, she says, and “once you’ve borrowed from this account, you must develop a budget or spending plan which allocates money for you to pay back the funds.” If you’re saving for other goals, such as buying a car, it’s best to keep that money in a separate savings account and not mix it with your emergency fund, Lash says.

Consider Buying Rather than Renting

For some, the flexibility and freedom of renting make it the superior choice. But if you’re still renting at 30, it’s worth doing the math to see if it makes more financial sense to buy a home. Lash points out that spending $800 a month on rent may fit well in your budget, but after five years, you’ll be out $48,000 with nothing to show for it. If you’re planning to live in the same city for several years, consider looking into whether you can afford to buy a home. Owning a home allows you to build equity and gain tax benefits such as deductions for mortgage interest and property taxes, Lash says.

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If you’re interested in buying a home, the first step is to apply to get preapproved by a mortgage lender. “This analysis determines the amount of mortgage that you can afford based on your income, debts, savings and credit history,” Lash says. “This is an important step because it tells you how much the bank is willing to lend.” You’ll find out if you’ll qualify for a mortgage and, if so, what price range you can afford to spend on a home.

Keep in mind that while a monthly mortgage payment can sometimes be less than your monthly rent check, owning a home also means extra expenses such as property taxes, homeowners insurance and possibly homeowners association fees, so compare costs carefully.

Get Your Debt Under Control

Many people in their 20s struggle with budgeting and credit card debt. By 30, aim to get this under control. Branton advises getting current on debt payments such as car loans and student loans and not carrying a monthly balance on credit cards. “If you are carrying a monthly balance and not paying off the amount in full, you need to review your budget to find out where you are spending too much and make the appropriate reductions,” he says.

Lash adds that by 30, it’s wise to create a spending plan or budget you can stick to so you know where your money is going and how much you can afford to spend. “Keeping track of spending and minimizing your debt is an essential part of building wealth and becoming financially mature as you age,” she says.

Look into Life Insurance

Life insurance may be the last thing on your mind in your 20s, but it could be worth buying to protect your family as you near 30. If you have children, it’s especially important to have enough life insurance to ensure your spouse will be financially stable without you, Branton says.

If you don’t have any dependents, Lash says it’s smart to get a simple, inexpensive policy that will be enough to cover your burial expenses. “Having a policy or money allocated for your final expenses will relieve your family of the financial burden should something happen to you,” Lash says. She notes that if you can save up enough money to finance your own burial expenses, you can cancel the policy. While some employers provide life insurance as a benefit, you lose it when you leave, so it’s best to purchase your own policy, Lash adds. Additionally, the younger you enroll, the lower your premium will be.

There are no guarantees in life, but tackling these five financial goals by age 30 – or at least making strong progress toward them – can help your future look a lot brighter.