By 35, you should have an entire kitchen cabinet dedicated to plastic bags, insist on making plans with friends (without ever actually hanging out with them) and know how to spell bananas. That’s the gospel on what to achieve by 35, according to Twitter
You also should have watched twice as many Netflix
series as you’ve finished, have at least three library books that are 30 years overdue, and have eaten a kale salad in public while wearing sunglasses, others added. Perhaps you should have also married a British prince.
These suggestions are part of the viral “By 35” meme that started a week ago in response to a MarketWatch article about saving for retirement in your 30s. The article cited a Fidelity Investments study that suggests having twice your salary saved for by 35. Many critics said the estimate was unrealistic, and so the social media platform was abuzz with other “unrealistic” (but mostly humorous) suggestions for what 35 year olds should do.
Jokes aside, saving and investing is incredibly important. Without a plan in place, giving up work itself can be unrealistic. Social Security and other benefit programs won’t be enough to rely on, and without solid income in your 60s, people may be forced to work.
MarketWatch talked to more financial advisers about what people should do by the time they’ve reached 35.
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Take a close look at your student loans
One of the most common responses to the MarketWatch article about saving twice your salary by the time you’re 35 focused on millennials faced with paying off crippling amounts of student loans. Student loans have replaced what would have probably gone toward savings, said Charles Weeks, founder and president of Barrister Wealth Management in Philadelphia. And women shoulder more of this $1.5 trillion burden than men.
Have an action plan to pay off those loans: Pay off the minimum balance, but also use excess cash received from raises, bonuses or gifts. And put that cash toward high interest rate student loans, said Stacy Francis, president of Francis Financial in New York City. You may also want to consider refinancing student loans, especially as interest rates increase, said Paul Tramontozzi, a financial adviser at Lob Planning in Purchase, N.Y.
Start planning for your starter home
Some people prefer to rent, while others believe that rent is dead money. For the latter group, when is the best time to buy? There is no magic age, of course, but here’s some guidance first house purchases and age. Forty years ago, the median age of first-time buyers was 29 to 30 years, according to real-estate company Zillow. Today, the median age for buying a home is 33, while more than half (56%) are aged 18 to 34. Either way, most bought before 35.
Finish your education (and get a Master’s)
Most people will have finished their college education by their late 20s, but it’s also a good time to think about getting a master’s degree, if you can afford it. College graduates with a bachelor’s degree earn an average of $61,000 per year over their career, but those with graduate degrees earn $17,000 more or $78,000 per year on average over the same period, according to “The Economic Value of College Majors,” a report by Georgetown University.
‘Save it before you ever see it’
Set up automatic payments directly from your paycheck so that the money you invest for your future is never touched. You can use this MarketWatch calculator and get an estimate of your Social Security benefits (you can do so on the Social Security Administration’s website). Then have a fairly conservative assumption for what returns you’ll have on your portfolio and calculate the dollar amount you should have saved.
Think of those automatic payments as another subscription, like Netflix or Amazon
Prime, said Ryan Fuchs, a financial adviser at Ifrah Financial Services in Little Rock, Ark. To make those payments seem even smaller, consider breaking them into weekly deposits, so that $100 a month is only $25 a week.
Live below your means
Assume your salary or compensation is 10% to 15% less than it actually is, said Ajay Kaisth, a financial adviser at KAI Advisors in Princeton Jct., N.J. “Live within that smaller amount,” he said, and if possible invest the difference automatically toward other long-term goals.
Living below your means may mean making trade-offs like driving a less expensive or year-old model car. “There are some sacrifices people have to make,” Weeks said, like choosing to live with roommates or cooking at home instead of ordering take-out meals most of the week.
And if you have children who may go to college…
Save for their education, at least if you anticipate helping them with this expense down the road, said Joyce Streithorst, a financial adviser at Frisch Financial Group in Melville, N.Y. That may seem like an entirely separate goal right now, but you don’t want to start saving in your 50s and 60s when you are planning for your golden years.
Understand compound interest
Compound interest — as opposed to simple interest — is interest calculated on both the initial amount of money you have invested, and the interest on the actual interest you have accrued. In its simplest form, it’s interest on interest. The more compounding periods, the higher the interest.
Here’s an example of compound interest, courtesy of Jacqueline Schadeck, a financial adviser at Tailored Wealth Management in Atlanta. If a 30-year-old put $100 a month in an investment account ($1,200 a year) over 40 years, that money could come close to $1.1 million.
Every little bit — even $5 or $20 a week when starting out — will help later on. Also, revisit the math once a year to see how you’re doing. “Don’t wait until you’re in your 40s,” said Randall Bruns, a wealth adviser at HighPoint Planning Partners in Downers Grove, Ill. “You’ll be punished mightily for having a decade less of compounding.”