How to start saving in your 30s

Piggy bank with glasses and chalkboard

Also see How to start saving your 40s and How to start saving in your 50s.

You're in your 30s, living paycheck to paycheck with only a few grand to your name and little hope of saving the hundreds of thousands of dollars you'll need to retire.

Well, snap out of it.

Our 6 smart moves to start saving after 30 is the blueprint you need to turn your financial life around and save more — way more — than you ever expected.

We know what you're thinking.

You scrimp and sacrifice for 20 or 30 years, and in the end, what have you got?

$20,000? $70,000? $100,000 if you're very, very lucky?

Stop giving into negative sentiment, commit yourself to a regular savings plan and you'll be surprised at how much you'll have by the time you retire even if you're current job pays a modest salary.

How can an auto mechanic and waitress save nearly $500,000 together? Or an electrician and retail salesperson $650,000? Or a registered nurse on his or her own save nearly $800,000?

Take a look at these examples.


Those are real incomes taken from the Bureau of Labor Statistics.

We assumed each worker would make an entry-level salary during their 30s that put them in the bottom 25% of all earners for each profession (that's to say 25% of the people doing this job made less and 75% made more).

During their 40s, we figured each worker would make the median income for their profession — 50% of their peers make more, 50% make less.

And during their 50s and 60s, we assumed they'd be in the top 25% of their profession, with only a quarter of their peers making more and 75% making less.

We also assumed that savings would be put in a tax-deferred retirement account such as a 401(k) plan or Individual Retirement Account and invested in mutual funds that returned a solid, but certainly not spectacular, average of 6% a year.

You want to take control of your life? This is the way to do it.

You won't have to wait until you're 65 to enjoy your efforts, either. You'll feel great as you see your savings grow and begin to appreciate what financial security is really all about.

Before long, you'll be able to maintain your standard of living without running out of money — no matter what. Layoffs and natural disasters, illness and injury will no longer be a debilitating financial calamity.

Here's how to get started.

Smart move 1. Use time to your advantage.

If you're in your early 30s, you still have plenty of time to make your money work for you through the power of compounding.

If you can sock away $4,000 per year and earn 6% on it, you'll have $54,421 in 10 years.

Continue that for another 10 years, and you'll have another $152,000.

By then, only half of your money will have come from contributions. The rest is what your pile of cash earned in interest over time.

Graphic displaying the percentage of people over 30 who save and how muchThat's what compounding does.

The first $100,000 is the hardest to save.

You should spend most of your 30s working toward that goal, because the sooner you do, the faster your nest egg will grow.

At $4,000 a year, it will take about 16 years to reach the six-figure mark. But it will take only another eight years to reach $200,000; you'd top $300,000 just five years later.

Smart move 2. Open a Roth IRA.

Emily Sanders, managing director for United Capital Financial Advisors in Norcross, Georgia, says a Roth IRA is essential for long-term savings.

That's because your money grows tax-free and can be withdrawn tax-free after age 59 1/2.

Over the course of decades, this can mean tens of thousands of dollars more in your pocket.

"Open one as soon as possible, and fund it to the max after you've got an emergency fund in place," says Sanders.

A Roth IRA is also very flexible. You can withdraw your contributions (but not earned interest) at any time without taxes or penalty.

Ordinarily, you wouldn't touch retirement funds in an emergency, but with a Roth you could if things got really bad. This means you could also stash a little extra emergency money here.

You can also use up to $10,000 from a Roth to purchase your first home.

You need to have at least enough earned income to match your contribution, and limit phase-outs don't start until $112,000 of income for singles and $178,000 for married couples filing jointly.

For 2013, you can contribute up to $5,500, or $6,500 if you're age 50 or older.

Smart move 3. Max out your 401(k) match.

If you have a 401(k) plan at work with an employer match, take full advantage of it.

Ben Barzideh, a wealth adviser at Piershale Financial Group in Crystal Lake, Illinois, says it's free money. If they offer a 4% match, it typically means they will match your contributions of up to 4% of your salary.

The match can vary from 50% of your contributions to a dollar-for-dollar match.

So, if you earn $40,000 per year and contribute $1,600, your employer could contribute $800 to $1,600.

"It's the only place you'll ever get a 100% return on your money. Even if you have high-interest credit card debt, you'll want to max out your match," says Barzideh.

Letting that free money accumulate and grow in your portfolio over the course of decades could mean an extra six figures down the line.

Our 401(k) calculator shows how your nest egg will grow based on your contributions.

change spilling out of a jar7 rules for a successful 401(k) retirement account: Here's how to make all of the right decisions so that you'll save more, invest wisely and take full advantage of all the tax breaks available to you. We can't guarantee that you'll be able to build the nest egg you need for the retirement you want. But we can guarantee this: Some savings will always be better than no savings.

Smart move 4. Eliminate high-cost debt.

The faster you pay down your high-cost debt, the more you'll be able to save in the long run.

Let's say you're carrying a $5,000 credit card balance at 15% APR. If you're making minimum payments of $112 per month, it will take you 22 years and $5,700 in interest to pay it off.

Double your payment, and you could pay off the debt in 24 months and save almost $5,000 in interest.

Our credit card payoff calculator will help get you started.

"With credit card debt, your money is leaving you to pay interest," Barzideh says. "The sooner you pay it off, the sooner you can make money that is paying you back."

A key point here: As you pay off debt, avoid incurring any more.

Smart move 5. Slim down your lifestyle.

Everyone blows a little money in their 20s, but you've got to be smarter now because you likely have more financial responsibilities.

Explanation of the 20/40/10 rule
You probably own a house. You probably realize you need to save for retirement. You've likely got kids or are planning for some soon.

Budgets change when you've got a family to think about. Suddenly, money you used to throw at nights out on the town has to go toward child care, diapers and college savings.

Every dollar counts, so if you can trim just an extra $100 out of your monthly budget, it can make a big difference. That's $12,000 over a decade of child-rearing.

Of course, one of the biggest expenses you can control is your vehicle.

Drive your vehicles as long as you can, and when buying a new one, consider the 20/4/10 rule.

Smart move 6. Bank your raises.

You likely haven't reached your peak earning years in your 30s. You might only be in the early stages of your career, so hopefully you'll start making more in the future.

It's tempting to elevate your standard of living as your income rises. That's OK, but Barzideh says you should also aim to bank a large portion of your raises.

If you're earning $40,000 per year and get a $5,000 annual raise next year, try to save at least half of it. If you average a 4% raise every year, that's 2% more per year you can save.

If you stayed on that path, you'd be earning $60,000 per year by year 10 and putting $10,000 of it straight in the bank.

"If you can live on less and save as much of those raises as possible, it will really help you down the line," says Barzideh.

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