Here’s a quick article you may want to take a look at if you are in your twenties or thirties:
It’s by financial planner Nancy Anderson, who writes about how “the decisions we make early on have a significant impact on the remainder of our lives….and can make or break our retirement plans.”
She lists seven important financial decisions 30-year-olds make that could come back to haunt them in their 50s. Here are the make-or-break decisions that may be putting your future in jeopardy:
The company you work for. Think about retirement benefits when you weigh your first job offers. Being able to participate in a retirement plan, and getting an employer match, are “vital to wealth-building in the long-term,” says Anderson. You can still build wealth on your own, but it’s a little harder, takes a lot of self-discipline and a fair amount of investment know-how.
Your starting salary. Even small differences add up to make a big financial impact over time, so try to negotiate your starting salary upward. Researchers say “an employee who starts his or her career with a salary of $55,000 instead of $50,000 (with 5% increases each year) would earn over $600,000 more in income over a 40-year career.”
Your choice of a partner. “Who you marry is one of the most important financial decisions you can make,” says Anderson. Based on what we’ve seen in over twenty years in the financial planning industry, we would certainly agree.
Make sure you and your partner share the same financial values and are committed to reaching the same goals. We’ve had clients whose financial futures (not to mention their marriages) were completely undone by partners with extreme gambling, debt or spending problems. You can’t move forward if your partner keeps pulling you down into the ditch.
When you have children. Deciding whether to have children, and when to start a family, are important decisions for every couple. You might need to do some strategic thinking about how to best achieve that elusive work-family balance, and wait until you’re financially and logistically ready to have children. My advice: if you do take time off to have kids, stay current with industry skills and software by networking, training and part-time work. Otherwise, you might find you’ve been made obsolete by the time you’re ready to transition back into the workplace.
How you invest. Anderson reminds young investors to pay attention to fees and expenses over time. We would add our own two cents here. As a young investor, one of the greatest advantages on your side is the immense power of long-term compounding. Don’t squander it by parking money in low-return investment options (like money markets and CDs) meant for the short-term. Also stay away from age-inappropriate choices like annuities and money-wasting products sold by commission (including complicated insurance products peddled to build wealth over the years, which they most assuredly will not). Your investments have to keep you afloat for sixty or seventy years, so invest wisely and with a purpose!
Whether you rent or buy a house. As Anderson aptly points out, “there are instances when it is better to rent than to buy a house.” But if you have steady income and intend on staying put for several years, buying a home can put you on the right track by directing monthly savings into a long-term real estate investment with generous tax advantages.
How you pay attention to your dollars. Those dollars you’re spending really do add up! Years of late night restaurant and take-out meals (the “there’s nothing at home to eat so I better go out” meals) could possibly have financed a 401(k) or two by the time you’re ready to call it quits. The key? Prioritize what you really want to spend your money on, track where your money is actually going, and make sure those two items are in sync.