Investment advice for your 30s and 40s

This is the second in a series of articles about financial planning throughout your life. My first article focused on advice for your 20s, when you've gained the education/skills you need for the career you have chosen.

You are earning money and learning how to handle it. I discussed identifying goals and budgeting, saving and investing to meet those goals.

In the final article, I will focus on advice when you are in your 50s and 60s. Now let's look at your 30s and 40s.

By the time you are in your 30s, you are generally settled in a career. You will probably change jobs a number of times before retirement. You probably have a family of your own, which comes with all the accompanying expenses, such as activities and lessons for your kids, family vacations, saving for your kids' college and buying a new home.

By this time, you should have an emergency fund equal to six months' worth of your normal expenses. This is your safety net that will protect you from the unforseen such as illness, disability, job loss, etc.

I keep reading that the savings rate in the U.S is actually negative, and that many people are living paycheck to paycheck. These folks are just one paycheck away from financial disaster.

Through your 30s and 40s, you should regularly evaluate your progress toward achieving the medium- and long-term goals that you set in your 20s. Make adjustments to spending to assure that you stay on track with these goals.

If you do not have an emergency fund, this should be your primary goal now. There will be many demands on your income. I know how kids can be when they want something. The nagging about drives a parent nuts. If spending on things that you do not need derails saving for your goals, then you need to make adjustments. Keep those long-term goals in mind each month and systematically put money away for them.

If you are saving for college education costs, the earlier you start, the less you have to save. Let the power of compounding work for you. There are several investment vehicles that you can use to fund college savings, so ask your advisor which is best for your family.

Hopefully by the time that you are in your 30s, you are established in your company 401K or pension plan. Many experts recommend putting 10 percent of your income toward your retirement. If you cannot afford 10 percent, then you can lower it, but it will take you longer and you will have to take more risk to achieve this goal. I suggest that you put this in your budget as a non-negotiable expense and if you have to cut expenses elsewhere, then do it.

By not going out to dinner, or buying fast food on a regular basis, you might find the extra money to put toward retirement. If you change jobs, don't forget to take your 401K with you. It can be rolled over to a new plan or if that is not allowed, put into an IRA.

Now you are in your 40s, so you have a better estimate of how much you will need to live on after you retire. Keep in mind that people are retiring earlier and living longer so you may need more money than you think.

Will your mortgage be paid off by then? I see many people taking out 30-year loans very late in life. Will you be able to afford that home on a reduced income in retirement? How will you pay for your own health insurance? Do you plan to travel, buy a vacation home? This is no time to make an error in your estimates, as it could lead to you not reaching your goals, or worse, going back to work at a later date.

Do not hope that entitlement programs will take care of you in your old age. Sit down with a financial adviser if you have not done so yet, and get real numbers. That way you know how much to save, what risk to take and what your time frame will be. Don't guess or put this off, or you could be spending your golden years working instead of living the life you had envisioned.

If you would like one of our advisors to run a complete financial plan for you, call us at 841-4277.

• Carol Perry, a Northern Nevada resident since 1983, represents the firm of Wachovia Securities in Carson City.