4 key personal finance moves to make before you turn 35
Author: Zach Rapport
They say 30 is the new 20. Considering how undisciplined many of us are with money in our 20’s, that’s probably a good thing — because that also means it’s not too late to learn some good habits and steady the ship. Whether you’re five years from 40 or you managed to stumble across this article with a decade to spare, here are 5 key personal finance moves you can make right now that could help make life easier on your future self.
1. Build a budget
You’ve probably heard this one a hundred times before — but that’s because it’s a really good idea. That’s why it’s our top tip here. Your financial goals may remain out of sight if you can’t build (and stick to) a budget.
When it comes to divvying up your income, consider the 50/30/20 rule:
- 50% for essentials: Think rent, groceries, bills, etc.
- 30% for wants: Maybe it’s a new gadget or you’re saving for a vacation.
- 20% for savings and debt: savings or investment accounts, paying off credit cards or student loans, etc. And don’t forget to include a pad of emergency funds within your savings account (or somewhere that’s easily accessible).
2. Tackle your debt
One strategy you could consider is debt consolidation. Jennifer McDermott, a Consumer Advocate with finder.com, often recommends “consolidating all debts into one place.” You can sometimes take advantage of introductory offers with low interest rates, and having one singular payment may feel easier to manage than juggling several monthly bills.
Then there’s the “good debt vs bad debt” debate. A credit card, for example, could be considered “bad debt” by some, because of the interest rate you may be charged to carry a balance. Drew Parker, who created the Complete Retirement Planner, says “Paying $200 per month on a $5,000 balance can take almost three years to pay off with a high interest rate (18% or more), and it will add more than $1,300 in interest charges.”
Parker adds, “If you were to instead invest that $200 per month, you could “have $10,000 in hand in the same amount of time (with a 7% return).”
3. Save, save, save
It’s never too late to start saving. Once you’ve got a plan to get any debt under control, saving — even a few dollars a week — can really go a long way.
If you get paid through direct despot, consider routing some of that to a savings account automatically. Out of sight, out of mind, and earning interest.
CFA Lou Haverty recommends saving at least the equivalent of 1x your annual salary by the time you’re 35. “If you’re not at that level yet, and a lot of people aren’t, it can serve as a good reminder that you should consider increasing your savings rate to get closer to that 1x mark.”
4. Keep an updated will
A will is a form of estate planning that can help protect your assets and your family’s future financial well-being should you pass away. It’s worth considering if you’ve recently tied the knot, had kids, or are otherwise wading into the waters of positive net worth.
While you can write your own will, it might be wise to at least meet with a professional first. If you became incapacitated without plans in place, someone may have to go to court to gain conservatorship over your finances.
If you’ve already put together a plan, it’s always a good idea to regularly check and update your beneficiaries.