Imagine a book about your life where each chapter focused on a specific decade. By the time the book ended, you would hope to see real character development. You would not want to get to the last chapter and see yourself mired in the same problems you had in the beginning. You would hope to see true progress and growth in every area—including your finances.
If you are serious about seeing your financial security increase, here are some landmarks to hit in your 20s, 30s, 40s, and 50s.
Your 20s.
Whether you are just getting out of college and hitting the job market or you have been working since high school, there are some markers you want to consider hitting.
1. Develop a marketable skill.
The chances are slim that you will retire from the job you are working in your 20s. In fact, it may not even be your desired career path. That is OK. Use this time to develop skills that align with your interests, regardless of the specific field. Aim to gain experience that will help put you on the right track.
2. Start budgeting.
From the outside, a budget looks like a bunch of rules and restrictions, but once you put one in place, you realize that it is the key to freedom. A budget puts you in the financial driver’s seat, empowering you to be proactive instead of reactive with your money.
3. Build an emergency fund.
There is no question that you want to start saving early, but you want a portion of savings that is just for emergencies. These earmarked savings will help you manage the unexpected, such as a job loss, medical emergency, unanticipated car repair, or unplanned travel expense.
Your 30s.
In your 30s you’ll start getting into a groove by laying down tracks to guide you through the rest of your life.
1. Consider your insurance coverage.
It is time to start planning for some inevitabilities. You are eventually going to hit some rough water; prepare for it. Make sure you understand your health, homeowner, and vehicle insurance. It is also time to explore investing in life insurance.
2. Make a debt repayment plan.
Debt is an anchor weighing you down, so you will want to create a plan to free yourself from all non-mortgage debt. Come up with a strategy and a timetable for getting yourself free and clear.
3. Start planning for retirement.
You likely have started saving for retirement already, but if not, that’s OK. It’s time now to look into your retirement options. Does your company offer a retirement account like a 401(k)? If you are self-employed or not receiving an employer match in your 401(k), consider opening an IRA instead. Either way, now is the time to outline your retirement goals and your plans to meet them.
Your 40s
You worked hard in your 20s and 30s. Your 40s is the season where your hard work is starting to pay off. Confidence, experience, and wisdom are playing a more prominent role in your life and decisions.
1. Downsize and simplify.
It is pretty natural that as you get promotions and raises, you have some lifestyle inflation. This means that your standard of living has risen along with your income. It’s time to turn that around. Evaluate what you have collected over the years, and slowly donate, give away, or sell the stuff you do not use and value. Start living a leaner lifestyle.
2. Increase retirement contributions.
Now that you are saving more money by tightening your lifestyle belt, you can make more significant investments into your retirement accounts. One of the primary regrets of retirees is not upping their contributions while they could.
3. Talk with a financial planner.
Along with increasing your retirement savings, spend some time talking to a financial planner. They can help you strategize ways to deal with any outstanding debt, invest more, and improve your financial portfolio.
Your 50s
Things start to quiet down in your 50s. Your children might be grown, and you might begin to enjoy time as an empty nester. Consider setting these financial benchmarks.
1. Consider long-term care insurance.
You might eventually get to a place where you need care for chronic illnesses or disabilities. That kind of care adds up fast and can quickly chew through your savings. It might be prudent to plan for it early while you are young enough to get good rates for excellent coverage.
2. Review estate-planning documents.
You have probably already done some estate planning. You want to periodically check on it to make sure that the decisions you have made in the past are still applicable. Take time to review (or draft) the following documents:
- Will
- Financial Power of Attorney
- A master list of:
- All the accounts you access online and their passwords
- The location of all your financial documents
- Trusts
- Will
- Life-insurance policies
- Titles to property and vehicles
- The location of all major assets
- Real estate
- Vehicles
3. Set expectations with your children.
It might be a hard conversation to have, but it is wise to sit down with the family and talk about expectations in case of a medical emergency. Let them know what your desires are regarding health care or plans for your estate. No one has to guess when you have been clear about your expectations.
Achieving financial security.
Every person’s financial journey is specific to them. We all have strengths and weaknesses when it comes to managing our finances, and there may be some landmarks that you hit earlier or later than the decades listed above. Whatever your journey looks like, being aware of these landmarks will help set you up for the future.
