Financial Planning through the Decades

Follow these tips to update your financial plan for your 20s, 30s, 40s, and beyond

TL;DR: Ask the Question. Start Early. Learn good financial habits. 

Your youth is a time for exploration, getting to know yourself, traveling, making mistakes, learning from said mistakes, finding the right career path, and carving out what makes you, well, you. Oh, all that, AND establishing good money habits. You will appreciate having good money habits your entire life, especially if you start those habits while you're young—and before it's too hard to change your ways.

Keep in mind that, while it's awesome to develop great money habits when you're young, ANY time is a great time to start practicing them. You're never too old (or too young) to practice good money habits (SEE: How to Teach Your Kids about Finances).

Overall, there are three basic elements for financial well-being: Ask the question, start early, and learn good financial habits.

Ask the Question

Asking the right question is the first critical step to creating a financial plan for your state in life. Some important questions to start pondering include:

• How much should I be saving? (See: How Much Should I Save for Retirement?)

• How aggressively should I pay down my debt? (See: How to Pay Off Debt When Cash Is Tight)

• How should I spend my money? (See: Where Does the Next Dollar Go?)

• What planning items should I consider for my loved ones? (See: How Much Life Insurance Do I Need?)

• Do I know what I don't know?

• Do we have enough? (See: Create Your Own Net Worth Snapshot)

Start Early: Start early, start early, start early! 

The more you save, plan, and budget now, the better off you will be later. The power of compounding (essentially, earning interest on interest) is truly amazing. Just you wait!

Establish Good Financial Habits

This concept goes hand in hand with starting early. Establishing good financial habits early in life is much easier than catching up later. So, what exactly are "good financial habits"?

• Don't rack up a bunch of credit card debt (See: How to Build Good Credit)

• Save what you can (See: How to Save Money When You're Broke)

• Don't buy things you don't need (See: How Much House Can—No, Should!—You Afford)

• Put away cash in your rainy day fund (See: How to Build an Emergency Cash Reserve)

• Think about the future (See: 10 Investment Tips for 20-Somethings)

Many of us ignore these basic financial planning strategies. Keep in mind, we don't subscribe to the misnomer that some people are "good with money" and some are not. Anyone can learn good financial habits. Saying "we simply are not good with finances" sometimes feels like an excuse. (#sorrynotsorry, sometimes it's tough love over here.)

Your To-dos by the Decade

The Money 20s

Watch your spending

Assuming you are most likely making more money than you ever have, you may be tempted to spend frivolously. But hold on, don't do it! Consider your purchases before you make them and establish good spending habits.

Get into the habit of tracking your budget

See: How to Create a Budget. Yes, you need a budget. Don't have one? Start by tracking your expenses and keeping an eye on how much you're spending on entertainment, such as dining out, travel, and shopping excursions. From there, build a more comprehensive budget when you are ready.

Pay off debt

Pay off your debt, especially high-interest debt, as aggressively as possible. Credit card debt? Pay this off first and aggressively. And try not to rack up any more. Pay off your credit card every single month. If you can't pay cash for it, you can't afford it. Student debt? Come up with a plan to pay it off next. (See: Should You Refinance Your Student Loans?)

Save, save, save

Be aggressive about your savings. Build an emergency cash reserve and start thinking about retirement (No, it's not too early.)

Open a retirement account

You may be eligible for both a 401(k) and an IRA. You should open and fund these accounts to the maximum amount each year. (See: No 401 (k)? We Can Work with That!)

The earlier you start, the better

Especially if changes occur later in life such as a family, college fund(s) and health emergencies, you'll be extremely thankful you already had these in place.

The Dirty 30s

As you enter your 30s, other elements come into play.

The new decade brings new purchases, such as buying a house, getting married, and starting a family. Have the basics in place, and adjust your budget to include these new expenses as needed.

Life Changes

House? Kids? Spouse? Career changes? Make adjustments to your plan as you go.

Reevaluate your Emergency Cash Reserve

The more risk you have (more mouths to feed), the higher reserve you will need.  

Life Insurance

Reevaluate your life insurance for proper coverage.

Estate Planning

Have your estate in order. Will your loved ones be taken care of if you were to pass away unexpectedly? (See: How to Create an Estate Plan)

College Savings

Set up and start to fund college savings plans for your children. (See: What's the Right College Savings Plan for Me?)

Retirement savings

Get aggressive about saving for retirement. By now, you should have retirement accounts set up and funded. Continue to contribute as much as you can to these accounts. Be diligent, have a plan, and sock away as much as possible. Push yourself to save more each year.  

The Horde-y 40s

Debt Under Control

By now debt your debt should be under control. You should feel comfortable about your cash reserve, and you should be aggressive about savings.

Peak Earning Years

These may be your peak earning years. The key here is to save and sock away (or "horde"... see what we did there?) as much as you can and get serious about retirement. Try to allocate any new raises toward your retirement.

Retirement Planning

Maximize your 401 (k) plan contributions and any other contributions you can make into tax-deferred and savings accounts.

Revisit Lifestyle Planning

Consider re-evaluating life insurance, take another look at your estate plan, and aggressively fund college savings plans for your children.

The Nifty 50s

Retirement Savings

Get even more aggressive about saving for retirement. You can take advantage of catch-up provisions, which allow you to contribute even more to your retirement accounts.

Lifestyle Expectations

Think about what your retirement looks like and discuss it with your partner. Where do you want to live? What does retirement mean to you (some consulting, no work at all, travel, etc.)?) Discussing this long-term plan early on can help you know where you're going, and more importantly, how to get there.

Long-Term Care Options

Review your long-term care options and know what's best for you. 

Debt, Estate, Cash Reserve

Make sure your debt, estate, and cash reserve are in order.

The financial health race is not about sprinting to the finish line. It's more like a leisurely walk to the end. Starting out at a steady and consistent pace will reap rewards even before the journey’s end. Pop into your To Do List in our app and stay on track with your plan!