sarahmichaelsonIn your 30s, your finances get real.

I remember putting money into a 401(k) in my 20s, and retirement was an abstraction: a far-away land that I would reach in another lifetime.

Now, in my 30s, I realize that I am halfway to retirement, and I only have 30 years left of my career. That starts to feel like a short amount of time.

Other things start to get real, too. If you’re like me, you may be feeling the same.

For instance, life isn’t as flexible to withstand a new career direction, or a move to a new city; you may need to build your career where you are. Living close to old friends and your parents likely becomes critical. Some might call this “putting down roots.”

I’m also getting older, physically: a late Friday night can now take all weekend to recover, not just the Saturday morning after.

Not that I have Friday nights anymore, since I had a baby—the most wonderful (yet most terrifying) thing that could happen to me. I had never worried so much about somebody’s respiratory system functioning before I had a newborn sleeping in the next room.

Having a child also brought into sharp focus the cost of college; some college calculators estimate that college can cost $600,000 for a private four-year college, and $300,000 for an in-state four-year public college.

With all of these new responsibilities, for the first time in my life I felt I absolutely required structured advice on how to handle the complex world of responsibilities in which I found myself.

My husband and I tried to talk about our looming financial obligations. I broached the topic on one weekend drive to my in-laws—one of the only reliable times we can talk because that’s when the baby sleeps. Nevertheless, it got a little touchy, as I was surprised to discover that we conceptualized our finances in very different ways.

I viewed our savings as goal-based; I have a goal for my retirement, a goal for a down payment for a house, a goal for my daughter’s college, and an emergency savings fund.

He saw our savings as one giant mass, and if we borrowed out of retirement savings to pay for the house, that was okay.

After talking with friends, it felt like nobody had a good answer on this. So I sat down with my colleague Alex Benke, a CERTIFIED FINANCIAL PLANNER™ and Director of Advice at Betterment, to get some free advice for many of us 30-somethings. I wanted to make sure I had my bases covered. The last thing I want is some unknown financial liability creeping up and crushing me.

Don’t Delay Having a Plan: Three Goals for Your 30s

Sit down and lay out your goals. If you’re cohabitating or in a committed relationship, discuss your goals with your partner.

Don’t worry, this isn’t set in stone: Life changes so you’ll update it over time. To get started, here are some typical goals for people in their 30s:

Emergency Fund

Sometimes your plan doesn’t go as planned, and having an adequate emergency fund can help ensure those hiccups don’t affect the rest of your goals.

An emergency fund (at Betterment, we call it a Safety Net Fund) should contain enough money to cover your basic expenses for a minimum of three to six months.

Even more may be required depending on how long you (or others in your line of work) are typically out of a job. Also, depending on how much risk you want to take with these funds, you may need a buffer on top of that amount. Read more about how to calculate your target amount, or follow this simple formula:

Monthly Expenditures x Re-Employment Period = Baseline Safety Net Amount

Retirement

You don’t want to work forever, do you? According to 2010 Census Bureau data reported by U.S. News and World Report, 30.8% of people from age 65 to 69 were still working full- or part-time jobs, which was up 9% from prior Census data.

If you think you could keep on working in your golden years, you might feel differently when you’re old with achy bones. Read more about setting up a retirement fund.

Major Purchases

A wedding, a house, a big trip. Each of these goals has a different amount needed, and a different time horizon. Our goal-based savings advice can help you figure out how to invest and how much to save each month to achieve them.

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Understand the Impact of Your Long-Term Investments

Make sure you are saving enough to meet your goals, especially for retirement. (Use Betterment’s RetireGuide, which helps you determine how much to save for retirement based on potential retirement ages and your desired standard of living.)

Use contributions to tax-advantaged accounts, like your 401(k) and IRA, to reduce the tax you owe through your lifetime. (RetireGuide also helps you figure out the most tax-efficient accounts to use for your personal situation.)

Make sure you are in a low-cost investment fund. Low fees are a critical to making sure your investments are going as far as they can.

Reduce leaks in your retirement plan: When you leave a job, it is a good idea to look into rolling your funds over to another retirement plan rather than withdrawing them; don’t just forget about them. Often, consolidating your old 401(k)s and IRAs into one account can make it easier to manage, and might even reduce your costs. You may wish to research further regarding consolidation and rollovers before you do so.

How to Cover Your Bases If You Have Kids

Life insurance. Generally you only need life insurance once someone is depending on your future income.

If you plan to have kids, you should start thinking about the situation your survivors would be in if you passed earlier than expected.

Life insurance can help pay off your mortgage or other debt, as well as provide assets for your survivors to live on. A service such as PolicyGenius helps you compare policies and determine how much you might need quickly and in a transparent way.

Estate plan. Think you’re too young? Think this doesn’t matter? Consider this: Everybody has a “default” estate plan at birth, defined by your state’s laws. When you die, your “estate” (read: your assets like a house and investment accounts, not some country manor) goes into a process called probate (the process varies by state).

When someone passes away without a will, an “intestate estate”—formally known as a “Last Will and Testament”—kicks in. The probate law defines how the estate gets divided and disbursed, and is pursuant to some general rules.

For example, if you’re married, your spouse gets it all, and if your spouse isn’t around, your kids get it all. Some of these rules might be illogical depending on your situation.

And for kids, there are usually no default rules about guardians. Once I looked into the default rules for my state, I realized I wanted control over what happened to my estate when I pass away.

It is worth the awkwardness to think this through and plan. When thinking about this consider that you likely need a will, healthcare proxy, and durable power of attorney, the last of which is a legal document giving someone else the power to act on your behalf should you be unable, due to death or disability. We recommend Everplans as an easy way to get started.

Dependent care deductions. Ask your HR department about these deductions. These can help pay for childcare, using pre-tax earnings.

Education. Start to save for education.

  • 529 college savings plans: You might have heard about this as a way to save tax-free for a kid’s education and maybe even get an income tax break. It’s sort of like an IRA for educational expenses. Some states let you deduct your 529 plan contributions on your state income tax return, up to your state’s limit. Contributions—from you, or grandma, or anyone else—are considered gifts, and subject to a gift tax-benefit maximum per donor. But keep in mind, if you don’t end up using that money toward your kids’ college, you could be penalized on the gains. There are some exceptions and you can read more on that here. Also, a 529 plan could affect financial aid.
  • If you don’t want restrictions on the savings for your kid’s education—and how you spend it—you might decide to just invest in a taxable goal.

Your Parents Might Become Your Responsibility One Day

As your parents get older, discuss their plans for healthcare and general care should they become infirm, before it’s too late. AARP has a decent checklist and tips for this uncomfortable but critical chat.

Knowing that I am at least thinking through these financial issues has given me some peace of mind—that’s the first step. Now to get myself over to yoga to delay physically aging to my next milestone—my 40s.

Getting Started with Betterment

It’s easy to set up your Safety Net Fund, Retirement goal, and a Major Purchase goal on Betterment. Our customer support team is available seven days a week to answer your questions. Get started now. You can even refer your friends and family so that you can each receive free time.

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Betterment is not a tax advisor. Any tax-related information is for educational purposes only and you should consult a tax advisor for your specific situation.