It doesn’t matter the stage of life you’re in, one thing will always stay the same- you are never too young or too old to start saving money. Your financial goals will change with each decade of your life and using your age can be a great way to calculate your savings potential for life events.
There’s no need to be hard on yourself if you haven’t started saving yet, there is always time to get on track with your finances! It’s easy to feel anxious about your financial health, both now and for the future, but all you should focus on is moving forward. Instead of thinking “How much should I have saved by now?” it’s time to think “How much could I be saving?”
Here is a decade-by-decade guide to personal savings to help you on your financial journey all throughout life.
Financial Moves to Make in Your 20s
Invest in Yourself
This decade is all about investing in yourself and setting yourself up for financial success. Typically, you’ll be beginning your career in your early 20s, and you’ll find yourself settling into the workforce. Use this time to take advantage of personal growth opportunities, such as professional development courses, classes, mentorship, and skills training. While it’s always best to be a lifelong learner, the foundation you establish now will increase your earning potential for the rest of your career.
Establish Responsible Credit Card Habits
Getting a credit card can be frightening for the typical consumer, but a credit card can be a significant tool in helping you build your credit. But this is only true if you use your credit cards responsibly, meaning you only put purchases on them that you can afford to pay off in full every month.
We recommend opening a card with a low limit, and then only put purchases on it that you were planning on making anyways, things like groceries, gas, and takeout. Then make sure to pay your balance in full before your monthly due date. Building a healthy credit score now will help secure lower interest rates for mortgage and car loans in the next decades of your life.
Start Building Your Emergency Fund
You may have more disposable money in your 20s than you will once you settle down and start having children. It never hurts to start squirreling away money for an emergency fund now, as you don’t know when you’ll run into an expensive medical bill, need car repairs, or lose your job. As a general rule of thumb, it’s recommended to have between three and six months’ worth of expenses in your emergency fund to ensure you’re covered.
Financial Moves to Make in Your 30s
Eliminate Your Debt
You should start seeing some financial stability and security in your early 30s, and it is now time to approach your finances from a different perspective than in your 20s. For many, this means starting by eliminating your debt so you can build your wealth in the decade to come.
Take some time to sit down with your finances, and look at exactly how much debt you have. Include everything from student loans, and medical payments to credit card bills and create a plan to eliminate your debt completely. Start with the loan with the highest interest rate, and then go from there.
Aim to Save 30% of Your Salary
By the end of this decade, you should have about two or three times your annual salary saved for retirement. While this number may seem shocking and a bit overwhelming at first, all you need to do is break it down and look at how much you should be saving from each paycheck. Break down how much of your salary you should save per year, and then divide that by how many paychecks you get annually. From there, make it a habit to take out this amount and put it directly into savings the same day you get paid.
Increase Your Savings Rate
There is a variety of retirement and savings options that provide you with “free” money, depending on which option you choose. For example, there are high-interest Roth IRAs and mutual funds that can enhance your savings, and all you have to do is sit back and watch your money grow! Also, don’t pass up on any employer contributions towards a 401(k) or a Health Savings Account, as this money can grow exponentially with compound interest over time.
Financial Moves to Make in Your 40s
Increase Your Income
This decade represents your peak earning years, making it extremely important to maximize your earning potential now. You’ll want to grow your skills, thus growing your income streams and savings. There are many ways you can do this, whether it be by pursuing different certificates to give you a competitive edge, negotiate a new, higher salary, or even move to another company that can match your salary requirements.
Remember, never sit by idly when it comes to your salary.
Pay Down Your Mortgage
Chances are, your mortgage is one of your largest debts. Consider taking steps to pay down your mortgage faster, so you can not only get ahead on your debt but you can save money in the long run. A great way to do this is by paying one extra mortgage payment per year towards your principal. Doing so can cut several years off of your entire mortgage while saving you thousands of dollars in interest.
Head to a Financial Planner
You want to constantly check on your financial health, and meeting with one of our financial advisors at Second Opinion Partners will put you in a great place. We will ensure your potential for savings is maximized, as well as giving you the advice you need to make informed financial decisions to help you meet your financial goals.
Financial Moves to Make in Your 50s
Set a Retirement Goal
As soon as you enter your 50s, it’s imperative to double down on your retirement savings. While retirement may not be in your near future, it is right around the corner, and you need to take the time to be as prepared as possible now, rather than later. Estimate how much you would like to save to comfortably live in your retirement, and set a goal now. To make this possible, create a plan with Second Opinion Partners and take it step by step.
Make Catch-Up Contributions
Once you turn 50, you are allowed to save even more money in your 401(k) and IRAs. Known as catch-up contributions, this is when you can put even more cash into your retirement savings accounts, making your total contribution larger than the standard contribution limit. These can be a great option if you are not yet at your retirement savings goal and you would like to speed things along.
Diversify Your Portfolio
You may not want to continue to invest in more “aggressive” stocks now that you are getting older. If this is the case, consider diversifying your portfolio to savings options that are deemed a bit more “safe.” For example, bonds instead of stocks, are a bit more of a safer choice that will provide an expected return that makes it easier to prepare ahead.
Financial Moves to Make in Your 60s
Delay Cashing in on Your Social Security Benefits
One of the best financial moves you can make in this decade is to delay taking your social security benefits. While you can start as early as 62 years old, you won’t be able to get the full benefits as you paid into the system. But if you wait until your full retirement age, you will be entitled to a full 100% payout. Plus, if you are still working at 62, delaying taking your social security checks will help to save that money for later on when you may need it the most.
Make a Plan for When You Withdraw From Your Accounts
There are different tax laws you must abide by when you withdraw from your savings accounts, so to ensure you are doing everything properly, make a plan ahead of time. This includes choosing what age you will retire, what age you will take social security benefits, and how much you will withdraw every year from your 401(k)s or other investments that you’ll need to live off of.
Plan for a 30-Year Retirement
It’s always safe to plan for more than you need, so as a rule of thumb, plan for a 30-year retirement. You don’t want to think of your retirement as something with an end date, rather you want to set yourself up for ongoing financial success. It’s always best to prepare your finances for the long haul, rather than to blow through all your savings within just a decade or so.
At Second Opinion Partners, it is our goal to help you identify, prepare and achieve your “One Best Life.” We are here to help you make informed financial decisions with clarity and confidence, and our team is here to ensure your financial health is in a great place no matter what decade of life you are in.
Interested in getting started? Contact us today for more information.