In your 20s, it is the time to spend exploring what the world has to offer. It is an excellent opportunity to figure out what and where you wish to go in your personal life and career. Below are some questions to ask yourself as you approach 30.
What are your overall career objectives?
The better question here is what you want to pursue in life? What career would provide for yourself, personal goals and financial objectives? Switching careers is sometimes necessary choice, but establishing an overall goal now will help setup you up for future financial success.
To help achieve those objectives, you might need to attend a trade school, college or some other formal training. Perhaps you will need to learn a life skill or pursue starting your own business. These are noble ambitions, but one thing to keep in mind is a loan might be required. Loans, such as an education loan, can keep being a financial burden and be part of your budget for a long time. You will still be with a financial obligation and burden if you decide not to go that path with your career. Ask yourself if this is something you want to do when approaching a career path.
Where to live?
Housing expenses are a big part of your monthly budget. Housing can vary between buying a home or renting. Choosing a location to where you want to live can help with those decisions. If you like the lifestyle renting might be a great option for you and your career can blossom in NYC. A house in the suburbs could also be your financial and personal goal, try finding a location that fits that need plus your careers goals.
Big salaries follow big cities. Big cities come with bigger expenses and higher cost of living. For example, the median house price in Phoenix is $269,000. Cities such as San Francisco however are $3,629 to rent an apartment in the city. In either case, it is best to pick where you want to live that support your financial and personal goals.
Marriage and Children
Many people in the past have followed the path of getting married and having children. In today’s society, this is not always the case. This is not only financial decision but a personal one. Marriage might bring in dual income but also can bring additional expenses. Bill could become shared or divided depending how you decided with your spouse. If one person is not keen on saving, this could become a financial burden. If your spouse makes more than you, this could bring in a new standard of living you would not have a single income. Getting married should not be a financial one but a personal one, but there are financial implications.
Children are great to have as part of your family if you pursue that. Having children again is not just a financial decision, but a personal one. Children require many additional financial obligations beyond room and board. That could be medical, childcare, education, extra-curricular, larger living space and more. It is up to you if you can afford them, how many you want to have and when. Maybe waiting till you are more stable and ready to have children might also be a better fit. Maybe having children is not in your plan and that is an option.
What lifestyle you are looking for in retirement?
How much you have saved and invested will drive the lifestyle you have during retirement. Maybe you want to travel the world or content spending your golden years on a beach. In any situation, knowing you need to save for retirement should be in your planning, even if it is a long way off. The goal here is how to save now and allow the weight of compound interest to benefit you.
Example. Jim is 25 and saves $200 dollars and retire at 65. Assuming a 6% interest rate, Jim would have saved $371,428 despite only putting away $96,000.
Another example, Sam waited till 35 to save $200 dollars and retired at 65. Assuming a 6% interest rate, Sam would have saved $189,739. That is $181,689 less than Jim. For Sam to have saved the same as Jim by the time he is 65, Sam would have needed to save $392 dollars each month. That is $192 more than Jim a month. That is the power of compound interest.
The earlier you save, the more you will have in retirement.
There are lot more questions when traversing your financial path throughout your life, but these questions above can help set a road map for your future.