7 Financial Decisions Made in Your 30s That May Haunt You in Your 50s

People often say “life is short” as a justification to do or buy something immediately rather than waiting. But the truth is, life is not short. Life is long. The average life expectancy for an American male is 76.2 years, and 81 years for a female. A thirty-year-old discussing a short life may actually be looking at another 50 long years.

This is good news! And, financially speaking, a long outlook on life is important, because the decisions we make early on have a significant impact on the remainder of our lives. Specifically, these decisions can make or break our retirement plans.

Here are seven important financial decisions 30-year-olds make that could come back to haunt them in their 50s:

1. The company you work for. There are many things to consider when choosing a job, but the retirement benefits offered are vital to wealth-building in the long term. A 30-year-old who doesn’t carefully research his or her benefits and chooses to work for a company with no company match or retirement contribution could be way behind someone who works for a company with robust benefits. For example, a 30-year-old making $75,000 a year who saves 10% of his or her income in a 401(k) and earns an 8% average return would have a balance of just under $600,000 at age 55. Compare that to a 30-year-old who saves 10% at a company that matches 5% and adds a profit sharing contribution that averages 5% a year. He or she would have almost $1.2 million in their retirement account—double our first example’s amount—at age 55.

2. Your starting salary. Even a slightly higher starting salary can jump start your earning potential. A study by George Mason University and Temple University showed that employees who negotiated their starting salaries averaged a $5,000 increase compared to those who didn’t negotiate. Due to the effects of compounding, the researchers estimate that an employee who starts his or her career with a salary of $55,000 instead of $50,000 (with 5% increases each year) would earn over $600,000 more in income over a 40-year career.

3. Your choice of a partner. Who you marry is one of the most important financial decisions you can make. I'm not advocating you marry for money—quite the contrary. Marrying for love and staying together is a smart financial move. Whether the 50% divorce rate is an accurate statistic or not, we can all agree that when it happens to you, it is devastating both emotionally and financially. The divorce itself can be expensive and dividing financial assets unravels your financial planning. Just ask Robin Williams, who is returning to television after two expensive divorces!

Your choice of a mate isn’t only about love and commitment; it’s also about financial compatibility. If you and your partner are compatible money-wise and commit to setting up a financial plan to save, invest and build your future, you can enjoy life and create financial security at the same time.

4. When you have children. Americans are delaying having children. In fact, according toNational Health Statistics Report, more than one in three college-educated women will have children after the age of 30. In the past few decades, the average age of American first-time mothers has increased by four years, and first-time fathers are aging at the same rate. Since the recession in 2008, the only age group that has continued to have more babies than in years past is the “over 40” group.

In Sheryl Sandberg’s book, “Lean In,” she encourages women not to pass up promotions because of plans to have children. If you have plenty of support at home, this can be a great idea. Another way to look at it is, if you plan on having children, don’t wait because you are focusing on your career or waiting for financial security. There are advantages to having children earlier.

One reason has to do with timing of kids’ expenses. Consider a couple that has children when they are 25 years old. Before they hit their 50s, their kids are past the very expensive college years. These parents, still young themselves, have 15 years to focus on their own retirement savings if they plan to retire at 65. Couples that have children when they are 35 years old may not see the light at the end of the “empty nest” tunnel until they are 60—much closer to retirement age.

5. How you invest. Investing in high-cost managed accounts can take a heavy toll on investment returns over time. According to Forbes contributor Rick Ferri, founder of Portfolio Solutions, those fees can add up to 40% of your return each year. Rick shares an example of how, with annual mutual fund management fees of 1.1% and an additional advisor fee of 1% (on the first $1 million of your assets), an investor trying to squeak out a return of 5.3% (the expected return) of a portfolio of 60% global stocks/40% U.S. bonds could actually pay 40% of that return in fees. Make sure you weigh the long-term impact of fees when investing; consider choosing low-cost mutual funds or index funds for retirement savings.

6. Whether you rent or buy a house. There are instances when it is better to rent than to buy a house. If you need mobility, don’t plan on staying in your area for long or aren’t interested in potentially being a long-distance landlord, you may be better off renting. However, in the long term, owning your home can be a coup for pre-retirees. Without even taking home equity into account, a homeowner with a fixed-rate mortgage won’t have to worry about a rent increase. Having a fixed housing cost is increasingly important as you get older, since rents can increase with inflation and you are attempting to estimate future expenses. As a homeowner, the mortgage will eventually be paid off and your housing budget will only have to cover taxes and repairs, so there may be more money to enjoy during your retirement.

7. How you pay attention to your money. If I could take back what I spent in the past twenty years on coffee, clothes I bought on sale but rarely wore and my “guilty pleasure” books, I’d be a wealthy woman. Tracking expenses to see where your money is going which you can do with your bank, Quicken, or in the LearnVest Money Center (*disclosure – I work for LearnVest Planning Services) and identifying blind spots can help you save more and spend less. First of all, when you are tracking expenses, you have a heightened awareness of your money and subsequently are more reluctant to part with your dollars. I hear clients exclaim all the time, “I had no idea I spend $600 a month on restaurants (or $800 a month on shopping). I am shocked!” When tracking, you can more easily identify areas for cost savings and put those savings toward your financial goals.

Mickey Mantle said, "If I knew I was going to live this long, I'd have taken better care of myself." I suggest that if 30-year-olds knew just how young they’d feel in their 50s and how much life is left to live, they’d take much better care of their finances.

Life is long. Make decisions accordingly.

Nancy L. Anderson, CFP ™ is a fee-only financial planner with LearnVest Planning Services and a blogger for Deer Valley Ski Resort. Company website is LearnVest.com (code Retire50). Follow Nancy on Twitter.



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