These Financial Decisions You Make in Your 20s and 30s Can Make or Break Your Financial Future

Have you ever wondered which life decisions brought you to where you are right now – at this very moment? Or, how your life might be different if you made a few decisions differently along the way?

The truth is, some decisions we make early on can determine where our life is headed – especially in a financial sense. And, very often, the good and bad decisions we make in our 20s and 30s have a lifelong impact, mostly because there’s plenty of time for those decisions to snowball on themselves over and over again.

Which decisions matter the most when it comes to your money? If you’re older, you’ve probably mulled over your life choices plenty already. But the younger you are, the more time you still have to fix things — before they get too far out of hand. Your past financial mistakes may have put you on one path, but you can choose a different one going forward.

Here are some of the most important decisions we make in our 20s and 30s, and what you might want to do differently if you still have a chance:

#1: Where you live

Where you live – and how much you pay for housing – can play a huge role in your future financial state. However, it’s important to note that the sword strikes both ways. Living in the inexpensive south or Midwest will absolutely help you save money, but you may not have the same type of job opportunities you would in a larger city or metropolitan area.

The average rent in a one-bedroom apartment in Boston, San Francisco, or New York City may range from $2,930 – $3,680, but you have to factor in what big city living could do for your career. While you’ll pay out the nose for a place to stay, you could make connections that could lead to much greater earnings overall.

And, let’s not forget that salaries in big cities tend to be a lot higher. A marketing manager in the New York City metropolitan area earned an annual mean wage of $188,510 in 2016, but the same job in Western Central Illinois paid just $83,000.

Then again, you may never be able to afford a home in Manhattan, where the average home price is inching toward $1.4 million. In Springfield, Ill., on the other hand, the average home price is just $105,000.

The bottom line: Where you live can make a huge difference in your ability to purchase a home or save for the future. However, your location can impact your earnings and career potential, too.

Related: Five Reasons I Love Living in ‘Flyover Country’

#2: Your choice of college

Your choice of college affects more than your eventual circle of friends; it affects your finances, too. Choose a less expensive school, and you could graduate with a lot less debt, while a more expensive school could leave you saddled with student loans for decades.

Unfortunately, this decision is a lot more nuanced than just choosing between a public or private school. Your college choice may depend on the financial aid you receive, and also on the college major you want to pursue.

Either way, the consequences of overpaying for a college degree can absolutely last a lifetime. The average four-year public university now costs $20,770 per year for tuition, fees, and room and board. That’s over $80,000 for a degree — and that’s if you choose an in-state public university. A private, nonprofit college will cost you more than twice as much: $46,950 per year on average, according to College Board.

These figures may make a two-year degree seem like a better decision. As College Board notes, average tuition, fees, and room and board at two-year schools amounted to just $11,970 for the 2017-18 school year. While graduates with a bachelor’s degree or better tend to earn far more over the course of their careers, there are plenty of high-paying jobs that only require an associate’s degree.

No matter what you choose, any student loans you carry into adulthood can impact your ability to grow your wealth. So, make sure you choose wisely.

Related: Two-Sided Coin: Is College Worth the Cost?

#3: Whom you marry – or whether you get married at all

Getting married comes with some tangible financial benefits. You get to split the costs of housing and daily living expenses, for example. If your partner has a higher salary than yours, you could also score a better standard of living than you could afford on your own.

But, the financial benefits of marriage could be truly limited if your partner isn’t that great with their finances. Will you marry a saver or a spender? Will your partner pay for their share of the bills, or will they cost you more trouble (and money) than you bargained for?

Whether you get married or share your life with someone can impact your financial future, but who you marry and their attitude about money matters just as much.

Related: Why Your Spouse Is Your Most Important Money Decision

#4: Whether you negotiate your starting salary

If you don’t negotiate your salary – and especially your starting salary – you could be sacrificing up to $7,500 per year in lost earnings. This is according to GlassDoor’s “Know Your Worth” tool – an online calculator that helps people study salary data they can use to negotiate pay.

And as intimidating as negotiating sounds when you’re just starting out and willing to accept almost any entry-level job in your field, if you accept a first real salary that’s lower than it should be, it could follow you around for years – and even to other jobs.

For example, imagine you started a job with a salary of $40,000 and received a 3% raise each year. After 10 years, you’d be earning $52,190 a year. If you had started out with a $45,000 salary, on the other hand, you’d be earning $58,714 – more than $6,500 more per year. And if you decided to change jobs, you’d likely hold out for that extra $6,500 – and a potential employer would be more likely to offer it to you, since it’s what you’re already earning.

Related: Five Salary Negotiation Tips for People Who Hate Talking About Money

#5: Whether you rent or buy a home

There are a ton of factors that can impact whether someone decides to buy a home or rent. Fortunately, there are advantages to be had on both sides of the equation.

Buying a home comes with the notable benefit of being able to build equity as you pay down the principal on your mortgage over time. And if your home rises in value, you could also turn a profit on your property when you go to sell. It’s one of the most tried-and-true ways middle-class Americans have been able to build wealth, and the average homeowner’s net worth is 45 times that of the average renter.

Of course, homeownership isn’t always ideal since you’re also on the hook for maintenance, upkeep, and repairs. And, when you go to sell, there’s no guarantee you’ll break even after paying realtor fees and closing costs.

Renting can be a smart option since you don’t have to worry as much about fluctuations in your local real estate market or paying for repairs. You also have more flexibility to move if you come across an excellent job opportunity.

Either way, whether you choose to rent or buy can make a big impact on your financial health – good or bad.

Related: Buying a Home This Year? Start Now to Get Your Credit in Shape

#6: How long you wait to have kids – or if you have kids at all

Many people say that the cost of having kids is the best money they’ve ever spent, but that doesn’t mean that kids are affordable. Between the costs of daycare, housing, healthcare, and education, the USDA says the price tag of raising a kid to age 18 is over $233,000!

When you have kids is just as important to your financial future as whether you decide to have them.

If you have kids when you’re especially young and not earning a lot, for example, you might struggle so much to pay for essentials like childcare or healthcare that it’s hard to save for retirement or the future.

If you wait until you’re more established and older to have children, you could already have a small nest egg and more financial stability.

Of course, you can save a bundle by not having kids at all and skipping all child-related expenses.

Related: The Financial Decision of a Lifetime: Should I Have Children?

#7: When you start saving for retirement

When you start saving for retirement matters as much, if not more, than how much you save. Why? Because the power of compound interest offers a distinct advantage for those who start saving and investing early.

To illustrate how big a difference this can make, let’s compare two people who start investing at different times in their life:

Kevin is a 25-year-old who invests $500 per month in a retirement account for 40 years, until he’s age 65.
Keith starts investing at age 45, saving $1,000 per month for 20 years to try and make up for lost time.

By age 65, Kevin would be sitting on $928,572 in retirement savings, assuming an average annual return of 6%. Keith, meanwhile, will be approaching retirement with $441,427 — less than half as much, despite contributing just as much money to his retirement account.

How did Kevin end up with so much more money saved? The answer is simple: time and compound interest.

#8: Your mentality about money

While all the choices on this list can lead to a financially fruitful future or a broke one, there’s one factor that may be more important than the rest – your money mindset. How will you prioritize your spending and savings goals in a world where consumerism is the norm and pretty much everyone you know is living above their means?

How you answer that question could make you richer or poorer – and that’s true no matter how much you earn. After all, we’ve all heard about “millionaire next door” types who live frugal lifestyles so they can save huge sums of money on unremarkable salaries. However, there are just as many people who earn a lot and spend every cent.

If you approach every financial scenario with a “YOLO” mentality, then it’s likely you won’t have much saved by the time you retire. But, if you’re dedicated to saving and only splurge for the things you want most, you have a better chance of reaching your goals.

Will you spend, or will you save? Like every other factor on this list, the choice is yours.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

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