5 Money Goals to Reach By Age 35
1 Eliminate Debt
If you’re carrying student loan debt or consumer debt (from things like credit cards), you need to make a plan to repay the money you owe and be well on your way to debt freedom before 35. Cut your expenses, live like a college student, pick up a side gig to earn extra money—do whatever it takes.
Aim to make more than one payment per month, or make your payments as big as your budget will allow each month. Knock out your highest-interest rate debt first if financial efficiency is your top priority. The interest rate determines how much money you’re paying each month to hang onto that debt, so eliminating the highest also eliminates the one costing you the most.
Is the math telling you it’s just impossible to hit this money goal of debt freedom by 35? Don’t despair. Just make sure you’re heading in the right direction and making progress in your repayment plan. And whatever you do, don’t rack up more debt before 35!
2Have At Least Three Months’ of Expenses in Cash Savings
Otherwise known as your emergency fund, you should work to establish a cash savings account that holds at least three months’ worth of necessary living expenses. This reserve can help you handle a financial emergency or cover an unexpected cost.
Hopefully you’ll never need to use your emergency fund. But if anything financially catastrophic does strike, you can cover the damage with this cash instead of completely busting your budget or sending yourself into debt.
Already met this money goal? Awesome! Now work to boost that emergency savings level up to six months’ worth of expenses—or establish separate emergency funds earmarked for specific liabilities, like your car,
home
, or other potential money-sucking possession or responsibility.
And if you’re self-employed or own your own business, consider a business emergency fund or an even larger personal emergency stash of cash. Forgoing things like someone else writing you a regular paycheck and paid time off puts you at greater financial risk than someone working in an employee role for someone else’s business.
3Contribute to Retirement — and Understand What’s Going On
Before you hit 35, you need to have:
established retirement accounts
contributed funds each year (and hopefully increased those contributions over time)
learned what the heck your money is up to in those mysterious 401ks and IRAs
Let’s walk through each of these. The first is the easiest step. Simply open yourself a retirement account. If you have something like a 401(k) or 401(b), get on that and grab any employer match available by contributing at least enough to secure it.
If you don’t have any retirement accounts via an employer, open an IRA. That stands for individual retirement account, and you can open either a traditional IRA or Roth IRA. And if you’re self employed? Try a SEP IRA or Solo 401(k).
Next, actually contribute to those accounts! Start small if you need to—even 1% of your income is exponentially better than zero. As you increase your income or earn raises, try to contribute as much of those increases to your retirement accounts as possible.
Most experts advise a savings rate around 15% of your income. But there’s no reason you can’t contribute 30%, 40%, even 50% of your income if you can swing it. Doing so severely cuts down on the years you’re required to work and earn an income.
Finally, you need to do more than glance at a monthly statement, not comprehend or process a bit of it, and toss it on the “shred” or “file” pile. Take the time to educate yourself about your retirement accounts and what your money is invested in. Examine how much that’s costing you;
what kinds of fees are you paying
? Over time,
fees
can eat away at hundreds of thousands of dollars worth of your returns, so this is important to understand.
You need to understand investments in general. No one cares as much about your money as you do. You need to know what it means when you see your contributions are invested in things like “growth funds.” You need to know what an asset allocation is and how to re-balance it. You need to know the difference between actively managed mutual funds and passively managed index funds, what you prefer your money to be in, and why.
It only takes some of your time and effort to learn about what your money does after you contribute it to retirement savings. But that’s all you need to pay a little bit of attention to what’s going on.
4Understand How to Budget and Live Within Your Means
You MUST understand how to create a budget and track your cash flow each month by the time you hit 35. If you’re still practicing the technique of totally ignoring your finances, it’s time to focus and play an active role in your personal money management.
You can use a number of free tools to help you create and stick to a budget, or you can go the old fashioned route and balance your checkbook and plug numbers into your own spreadsheets. There’s nothing wrong with either method. It doesn’t matter how you track your money. You just need to do it.
You also need to learn how to live within your means. This means you spend less than you earn—and, ideally, can even save more than you spend. (The latter is a lofty goal, but you can do it if you work toward it!) Another way of putting this is you’ve learned to eliminate unnecessary spending and you’ve tamed your need for instant gratification. You understand that you have a set amount of money that you can spend, and you stick to it.
5Identify What You Want to Accomplish
Eliminating debt, saving money, investing for retirement, living within your means — and understanding why and how to do all those things — are important goals to accomplish before you turn 35. But what about what happens after 35? Where do you go from there?
Having some direction and focus before you hit your mid-thirties is just as important of a goal to achieve because it means understanding what you’re working toward for the long-term. Do you want to
retire early
and move to the South Pacific? Do you want to start your own business or charity? Do you want to travel full-time?
Take time to consider where you are and what you’d like to accomplish in your lifetime. Yes, it’s a big task and not something you can figure out all in an afternoon (unless you’ve already been thinking about things like this). When you can answer what you want to do in the future, you can start figuring out what action you need to take now with your money to make that possible.
5 Money Goals to Reach By Age 35
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