Imagine a book about your life where each chapter focused on a specific decade. By the time the book ends, you would hope to see real character development. You do not want to get to the last chapter and see yourself mired in the same problems that you had in the beginning. You want 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.
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 pretty slim that you will retire from the job you are working in your 20s. In fact, it is probably not even your desired career path. That is OK. Use this time to develop marketable skills that align with your passions and gifts that will 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 get 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 protect you from an unexpected job loss, medical emergency, unexpected car repairs, or unplanned travel expenses.
It is during your 30s that you will 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 considering 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 consider investing in life insurance.
2. Make a debt repayment plan
Debt is an anchor weighing you down, so you will want to come up with 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
Hopefully you have been saving for retirement already, but if not, that is OK. It is time now to look into your retirement options. Does your company offer an employee-sponsored retirement option like a 401(k)? It might be the moment to get in on that. Either way, start considering your retirement goals and your plans to meet them.
You have 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 as your income has. It is time to turn that around. Start minimalizing. Get rid of 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 critical regrets of retirees is not upping their contributions while they could.
3. Talk with a financial planner
Along with increasing your retirement savings, you should spend some time talking to a financial planner. They are going to help you strategize ways to deal with any outstanding debt, invest more, and improve your financial portfolio.
Things are starting to quiet down in your 50s. Your children are probably grown, and you are beginning to enjoy time as an empty nester. Consider setting these financial benchmarks.
1. Consider long-term care insurance
Eventually you might get to a place where you need care for chronic illnesses or disabilities. That kind of care adds up fast and will quickly chew through your savings. It is good 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. Consider examining (or drafting) the following documents:
- Financial Power of Attorney
- A master list of:
- All the accounts you access online and their passwords
- The location of all your financial documents
- Life-insurance policies
- Titles to property and vehicles
- The location of all major assets
- Real estate
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 an emergency. Let them know what your desires are regarding healthcare or plans for your estate. No one has to guess when you have been clear about your expectations.
Achieving Financial Security
Being mindful of these landmarks will be extremely helpful in setting you up for stability for the future. If you are interested in learning a little more about becoming financially secure, check out our article How To Achieve Financial Security