Life is a long, winding road, and not everyone follows the "house and kids by 30,
first million by 50" schedule.
But hitting certain financial milestones can help keep you on track. Here's a fun, decade-by-decade guide to navigating your financial journey. And if you need to catch up on a few of these, no biggie! If you're early, even better.
0-10: Learn to add and subtract.
In these early years, it's all about the basics. Learn to add and subtract because math rocks! Try selling something for money, like a classic lemonade stand, or offering car-washing services. Hopefully, your parents will give you an allowance – a crucial first step in money management. Save some of it for something you really want, and don't forget to buy a gift for someone else with some of your earnings. It's a great way to learn the joy of giving.
10-20: Work at a job for money
As a teenager, get a job and start earning your own money. Open a checking account and deposit part of your paycheck. Establish a Roth IRA, even if you need your parents' help – starting early can make a big difference later. Begin buying your own clothes and understand how much different things cost. Make informed choices about college and career paths, considering costs, your interests, and potential salaries. Get a low-limit credit card, use it regularly, and pay it off monthly to build good credit habits.
20-30: Learn to invest
Your twenties are a time to start learning to invest and budget. Continue feeding your Roth IRA and start a 401(k) if you haven't already. Organize a repayment plan for your student loans and prioritize your spending on the essentials – from couches to cribs to career suits. Keep your credit report clean by avoiding debt defaults and paying bills promptly. Make credit cards work for you by choosing an excellent cash-rebate card, using it for everything, and paying it off monthly. Set up a rainy-day savings fund through payroll deductions and buy life insurance if you have kids. Try doing your taxes at least once and track your money using a program like Quicken or Mint or a simple spreadsheet.
30-40: Continue pushing your retirement plans
As you move into your thirties, continue to plow as much as possible into your retirement accounts. If you have them, it's also an excellent time to buy a house and set up 529 college-saving plans for your kids. If you haven't already, switch your various insurance policies to high-deductible plans – you'll save on premiums and should have enough savings to cover the deductibles. Build your investing expertise by learning about exchange-traded funds, individual stocks, and bonds. Diversify your investments to include real estate, commodities, and foreign stocks. Boost your skills through advanced degrees and courses, or invest in tools that make you more employable. Follow the performance of your investments using a portfolio-tracking program.
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40-50: Autopilot Investment
In your forties, create an investment account separate from your rainy-day fund, retirement savings, and college-saving vehicles. Automate deposits from your checking account to this investment fund. Max out your retirement savings as much as possible. Use some money for something special, like a big family trip or installing a swimming pool. Talk to financial advisers to see if you need professional help with your investments. Discuss your parents' finances to ensure you understand their needs and can prepare for their future care.
50-60: Get the clear picture
Do the pre-retirement math to estimate how much money you'll have and how much you need to save. Pay off all your debts except for a low-interest, fixed-rate mortgage. Consider buying a vacation or retirement home if it's within your means. Educate yourself about Social Security, Medicare, and any pension benefits you might have. Invest in your future self by building a hobby shop or taking classes to prepare for your next act in life.
60-70: Start collecting Social Security
Start collecting Social Security and develop a part-time consulting gig or side hustle to stay active. Take advantage of senior discounts – they're there for a reason! Save for potential long-term care needs and adjust your investments to provide the needed income. Decide whether to manage your investments yourself or hire a professional. Be strategic about charitable giving, making fewer, more significant gifts, and consider setting up a donor-advised fund. Splurge on a retirement trip or a big toy you've always wanted. Prepare yourself psychologically for the withdraw-and-spend phase of life after a lifetime of working and saving. Start serious estate planning.
70-80: Talk to your kids about your finances
If your finances are tight, cut back on spending. If you're comfortable, begin acting on your estate plan by being more generous with relatives and charities. Talk to your kids about your finances and ensure they know where everything is and what your wishes are.
80-90: Downsize or get rid of stuff
Downsize or declutter, handing off family heirlooms in a meaningful way. Donate household items you no longer use for charity or to help your grandchildren set up their first homes. Use your money to live comfortably – don't skimp on things like hearing aids or household help that keep you active and safe.
90-100 and beyond: Hire help, even if you don't need it
Hire help even if you don't think you need it – it's nice to have some chores taken care of, and your kids will worry less about you. Spend your money on whatever makes you happy.
Remember, this is a very general template. Life has its ups and downs – we lose jobs, get married, lose loved ones, and more. It's essential to rethink your path wisely to find the best options. We're all human, after all.
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