Once we reach 35 years old, we will have accumulated more than a decade of working experience. We will be wearing multiple hats, trying to juggle between our married life, children, paying mortgage and taking care of ageing parents. Let us look at what we should do with our money at 35 years old.
Accumulate Your Net Worth
By age 35 years old, you can use one metric to measure savings, you can focus on Net Worth to Expenses Ratio or Free Cash Flow to Expenses Ratio, instead of Income to Savings. American prefers to use Net Worth and Europeans prefer to use Free Cash Flow. After years of working, you will save regularly and invest throughout the entire market cycle, you should see your Net Worth increases by a few percent every year. As fellow Singaporeans, you should see your CPF increases over time.
Your Market Value
By 35 years old, you should be paid based on your value. This means you need to do your own research on what the market is paying. You need to keep tab of how your work has being bringing value to the company and what was the most recent achievement before the salary negotiation with your boss. If you fail to negotiate, you will suffer a loss or lesser amount on your potential lifetime earnings. For example, a 35 year old woman who works for 30 years more and has a salary increment of 5% per year, an additional $5,000 today will create approximately $300k more over the remainder of her working life.
By 35 years old, you need to save three to six months of expenses in your Emergency Fund. This will cushion you for any unforeseen event such as job losses or change of career plan.
Short Term and Long Term Goals
If you have being reading my blog, you will have known that I am a firm believer of saving and investing for Financial Freedom. After talking to a friend and watching a personal finance video on Youtube, I realize that life should not be just about saving and saving, don’t get me wrong, you need to have the habit of actively saving whenever you are being paid.
I believe you need to create a bucket for short-term goals to make this life worth living. I have created a bucket for trip to Prague and France. When you have some gains in your equities or selling a property, you should take some of the monies and spend them on your short-term and long-term goals.
There is this saying “Money spent is real money, if not it is just a number.”
You need to build a trusted network of advisers consist of CPA (Accountant), Financial Advisor, Realtor and Lawyer. They need to be people who put your personal interest above theirs and not just out to sell you something which you don’t need. They will be able to provide you advise and guidance. They will be essential in making sure all bases are covered in your financial journey towards retirement.
Insurance is using a small fee to pass all your risk to the insurers. You need to seriously consider insurance, it is the only thing you need to buy it when you don’t need it the most. As you continue to age, the cost will increase.
Life is unexpected, you never know what will happen. Estate planning is for everyone. I will urge those with dependents to start a plan online to protect your family rather than leaving things to sort out. For Singaporeans, you can consider using MoneyOwl’s Will writing here (There is no affiliate link here).