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Colette Sexton on what people in their 30s should do to protect their finances.
In an ideal world, we would be able to access long-term tenancies. But in Ireland, long-term tenancies are few and far between, and protections for tenants are not strong enough. As a result, most people feel they have to get on the property ladder to secure a home for the long term and to avoid finding themselves homeless, particularly as they get older. It is not easy to get on the property ladder, but it gets harder and harder to secure a mortgage the older you get. Most banks will offer 30-year mortgages to those under 35, but there are often limitations on those older than that, so now is the time to prioritise house buying.
If you have a partner, and you both feel that you are “in it” for the long term, then you need to have the finances talk. Share the details of your salary and all your income, your savings, your debt – get it all out in the open. Then both of you can plan together to pay off debt if necessary, set savings goals, buy a property or move up the property ladder, and plan your pensions.
You might want to be childfree forever. Good for you. Your decision is better for the environment and all of your disposable income will be yours. However, if you do want kids, then it is important to plan for them before they even arrive. The average age of mothers for births that occurred in 2016 was 32.7 years in Ireland, according to the latest census statistics. This was up 5.1 per cent from 31.1 years in 2006. Kids are expensive. The average cost of raising a child until their 21st birthday in Ireland can be as much as €105,321, according to Laya Healthcare. The costs of feeding and housing a little person, as well as buying adorable tiny outfits, add up, and that’s before childcare is even mentioned. If you or your other half decide to leave work to become a stay-at-home parent, you will have to budget carefully and save as much as possible while you still have two incomes. If you both decide to remain in work, creche and/or childminder fees can equate to an extra mortgage every month. A baby savings fund is vital.
Many people are reactive instead of proactive with their finances. In your thirties, you should be living well below your means, so you can save for your pension and build up a secure nest egg (at least three months’ salary). You could aim to save a percentage of your salary so that when you get a pay raise, you increase your savings, instead of leaving them at your pre-rise level. It is also important to get rid of any short-term debt in your early 30s. Pay off any loans, and avoid the lure of buying a new car unless you can do so without taking on debt.
If you wait until after the age of 35 to take out health insurance, then you will be fined. There is a 2 per cent loading for each year over 34 years of age. This adds up quickly. If you are 35 when you first take out health insurance, the cost will be 2 per cent higher than a 34-year-old. If you wait until you are 39, the cost will be 10 per cent higher. That is a lot of money to load on your future self. Health insurance can seem like an unnecessary expenditure at any age, but it is better to be safe rather than sorry. You don’t drive your car without protecting it, and your body is the most important vessel you own.
Still in your twenties? Read this post on how to avoid financial mistakes.