So you’re close to hitting 35, huh? The clock is ticking and the time we could get away with procrastinating about financial decisions is over. Sigh.
This doesn’t mean you have to kiss your free spirit goodbye. No financial goal is worth that; but there are some milestones you may want to consider before it’s too late. Here are 14 financial decisions you should think about before you turn 35.
1. Should You Pay off Student Loan Debt?
If you haven’t already paid off your student loan debt, you’re not alone. Student loan debt is the only type of debt that has grown since the peak of consumer debt back in 2008. According to the Federal Reserve Board of New York, there are 37 million students with outstanding loans and almost 40% (the largest demographic) is between the ages of 30 and 50.
Now is the time to achieve your life goals and save for retirement, not pay for school. Having said that, don’t pay off federal student loans sooner than you have to. Federal loans can have fixed interest rates between 3.4% and 6.8%, which are low when compared to private student loans or other types of debt. Prioritize your current debts by interest rate and pay loans with the higher interest rates first.
Remember that the interest rate you pay on many student loans is higher than what you’re likely to get from investing in a retirement fund. So paying off your debts is literally the best investment you can make.
If you’re having trouble making your student loan payments, Federal Student Aid has programs that can help.
2. Do You Have a Retirement Plan?
When it comes to saving for retirement, compound interest is your friend and the earlier you start the better. To illustrate, imagine you start saving $1,000 a year when you turn 25 and continue doing that for 10 years. Even if you stopped contributing when you turned 35, you would still have $169,000 by the time your hit 65, assuming an average annual interest rate of 8%.
Related article: Warren Buffet’s Guide to Investing for Retirement
On the other hand, if you waited till you were 35 to start investing for retirement and also saved $1,000 a year until you turned 65, you would only have $125,000 by the time you turn 65, even though you invested three times as much.
If you’re 35 and you haven’t started saving for retirement, that may be discouraging. But it only gets worse if you continue to procrastinate. Start a retirement plan today. Parents, give your kids a head start and open a retirement fund for them as soon as possible, even modest contributions can grow into huge amounts.
3. Do You Want to Have Children?
If you don’t think having a baby is a financial decision, think again. The average cost of an uncomplicated delivery is $9,294 and the cost of raising a child in 2013 was estimated at $241,080 by the U.S. Department of Agriculture.
Don’t allow your family, friends or society in general to push you into having a baby. Children are a blessing but they are not a duty or the secret to happiness. If you do want a baby, consider the financial commitment involved.
4. Are You Saving for Your Child’s Education?
Starting early is also key when saving for you children’s education. To illustrate, if your daughter is 5 years old and you start saving $100 a month, you’ll have $23,664 for tuition expenses by the time she turns 18, assuming a conservative 6% annual interest rate. However, if you wait until she’s 10 to start saving the same monthly amount, her college savings drop to $12,345.
Use this College Savings Calculator to estimate when you should start saving for your child’s education.
5. Do You Want to Buy a Home, or Continue Renting?
The choice between buying a home and renting is one of the biggest financial decisions we can make. Although you don’t want to rush into buying a house, you don’t want to be paying for a mortgage into your retirement either.
Whether buying or renting makes more financial sense to you depends on many factors, such as how much the home costs, how long you plan to stay, what interest rate you qualify for, your tax bracket and maintenance fees, and so on.
The New York Times has an excellent calculator that combines these and other factors to help you determine the smartest choice for you. And we’ve put together a list of things to do before buying a home. Are you able and ready to save up for a mortgage, clean up your credit, and take on the responsibilities of homeownership? If not, you may want to continue renting.
6. Is It Time for a Career Change?
If you just read Steve Jobs and you were inspired by his “Choose a job you love and you will never have to work a day in your life” quote, take a breath. Although nobody is arguing that working in what you love isn’t a wonderful goal, it’s absurd to believe you can make anything you love into something that will pay the bills.
Not to rain on your parade or anything, but it’s just as likely that you’ll end up liking what you love a little less if you make a business out of it.
Switching careers, especially if it means going back to school, is an expensive and risky move. The older you get the harder it is to get a job, particularly with a field you don’t have much experience in. If you’re set on a career change, do it sooner rather than later.
Related article: 10 Important Financial Decisions to Make before a Career Change
7. Should You Buy Life Insurance?
Generally, life insurance only makes sense if you have financial dependents who would struggle to keep their current lifestyle without you. The average age men and women marry is 29 and 27 respectively; and the average age a woman had a first child in 2008 was 25. So if you’re approaching 35, the odds are you have one or more financial dependents.
Once you’ve established that you need life insurance, get it as soon as possible. The younger and healthier you are, the cheaper your premiums will be and that can make a huge dent on the cost of insurance throughout your life. Read up on these money-saving secrets life insurance companies don’t want you to know before choosing a policy.
8. No Question: Get Health Insurance
Suitable health care is important no matter what age you are. However, as you approach middle age – and some sources call 35 middle age (ouch) – you are more likely to both get sick and have financial dependents who need you to get back to work as soon as possible.
Even if you don’t have dependents, you can’t afford to be without some level of insurance. Only extremely wealthy people can afford to insure themselves. Fixing a broken leg can cost up to $7,500 and the average three-day hospital stay in the United States costs $30,000. Enough said. (Healthcare.gov)
9. Are You Saving Money for Emergencies?
Life is long, and it is getting longer. In 1960, the average life expectancy in the United States was 70 years. In 2012 it was 79. It’s likely life expectancy will continue to grow. That is good news, but it also means our saving accounts should grow proportionally.
If you haven’t already started a savings account, do it today. A savings account besides your retirement fund will help you achieve mid- and long-term goals, such as starting a business or buying a house, which will help increase your net worth.
10. Is Your Savings Growing with Your Income?
Although we all know we should invest as much as we can while we are young, preferably before we go to preschool, the truth is most of us don’t have all that much disposable income when we’re in our 20s. What is also true is that once you get into the habit of saving a certain amount a year, say $1,000, it’s easy to forget to increase the amount you save as your income grows.
If you already have a savings account, regularly reassess how much money you are putting aside. If you’re close to 35, you have about 30 years of work left in you. Make them count.
Instead of saving a set dollar amount every year or month, it is better to set aside a set percentage of your income, such as 10% or 20%. That way your rate of saving will increase with your income.
11. Can You Really Start Your Own Business?
Starting a business is easier when you’re young. Younger people generally have less non-work responsibilities to distract them and therefore more time and energy to invest in a startup.
Venture capitalists are also more willing to invest in younger people who are more impressionable, easier to train and loaded with boundless optimism and a the-sky-is-the-limit attitude.
12. Are You Prepared to Care for Your Parents?
As you approach 40, it is likely your parents, another family member or a friend will require additional care. According to a 2009 report by AARP, nearly 44 million Americans, which is one in every five adults, are family caregivers for someone over 50.
Providing assisted living for elderly parents can present a financial burden on families. According to a 2012 study by MetLife, the national average cost for assisted living base rates was $3,550 a month.
Don’t wait till it’s a crisis to start planning how you will provide for your loved ones when they can’t take care of themselves. Get together with your parents and other family members who can help and make a plan. Ask your parents about their wishes and preferences, and what they have for retirement savings. Determine how much help they need to carry out daily activities and assist them with creating a financial plan to deal with their increasing medical bills.
13. Do You Want to Go Back to School?
There’s no doubt, college can be a great investment. On average, those with only a bachelor’s degree working full time in 2011 made $21,100 more than full-time workers who didn’t. Also, in 2012, the unemployment rate among those with a four-year college degree was 7.1 percentage points below that for high school graduates. (College Board)
However, those statistics only include those who actually finish their degrees. According to a study by Education Sector, more than 30 percent of college students who take out loans to pay for school drop out with little to show for their investment. For them, trying to complete a degree was a terrible investment.
If your motivation for going back to school is simply to pursue an interest or hobby or you don’t have the money or time to study full time, you may consider taking free or very-low cost courses online. Institutions like EdX and Coursera allow you to take high-quality courses from top universities for less than $50 a course and they often provide certification.
14. Are You Spending Money on What You Love?
Don’t fall into the trap of making financial goals the be all and end all of your life. Being frugal, planning ahead and saving for retirement are powerful tools that can help you achieve your life goals, especially in your transition from early adulthood to middle age. But they are not in and of themselves worthy life goals.
Once you have a good set of financial goals, grab another sheet of paper and put your hopes and dreams to paper. Maybe you want to travel the world, or restore a vintage car all by yourself. Or maybe, you really do want to start your own business. If doing it makes you happy, the value in it is intrinsic.
You’re not a kid anymore, you have a better idea of what you want out of life. Whether it is starting a family, traveling the world or volunteering for a cause you admire, use good financial habits and tools to help you fulfill your dreams and enjoy a full life.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.