Personal finances can be hard, finding the time to keep on top of these can be even harder however the quicker you get on top of this, the quicker your financial situation will get better. Alfred Austin once wrote “Show me your garden and I shall tell you what you are”, this can be said about personal finances.
Depending on what age you are when getting serious with your finances will determine any extra work that will need to be done and it goes without saying that someone taking control of their financial destiny in their 20’s is likely to be better off than someone getting their act together in their 50’s.
That’s not to say that if you are in your 50’s or 60’s and haven’t done anything that all is lost, far from it. It means that you’ll likely need to put in more work, however no matter how late you start there is nearly always a way to improve your financial situation.
With that in this article we’ll go through financial moves you should be making in your 20’s, 30’s, 40’s, 50’s and 60’s.
Financial moves you should be making in your 20’s
In this decade you will (likely) be beginning your career and beginning to earn a full time income.It’s also likely that you have a credit card or two that is (hopefully) under control. You may also have a car (with debt) and if you went to college have a substantial amount of student debt that is needing to be repaid.
You may also be in a relationship and towards the end of your 20’s looking to co-inhabit, marry or bring a child into the world, events that will likely need a significant amount of savings.
The main point to watch is now that your income is increasing, make sure that your lifestyle doesn’t creep up to match this increase in income, you want a healthy savings amount each pay cycle.
For those who have large personal debts or credit card debts, taking on a 2nd job or starting a side hustle should be on your radar or you could be looking to build your own business given the lack of family ties that you will likely have in your 30’s.
Some of the steps you should be undertaking in this decade include:
- Set some basic financial goals such as savings targets, potential investments (including family home) and repaying debt.
- Creating a budget and living within your means
- Setting up an emergency fund
- Automating your finances and building healthy financial habits such as paying your bills on time
- Paying back then eliminating credit card debt
- Get your credit score and a copy of your credit file and if necessary work to improve this
If you have racked up significant credit card debt or student debt, putting together a plan to pay this down should be high on your list of financial tasks. The quicker you build healthy financial habits, the easier it will be to achieve your financial goals.
Financial moves you should be making in your 30’s
In this decade your income should be increasing exponentially and hopefully your savings capacity is also increasing. In this decade you will (hopefully) have repaid any personal debt and have made a big imprint into any student loans you may have accumulated.
You will likely be in a relationship in your 30’s and also may have a young family that you are bringing up. As a result of this young family some of your earlier savings capacity may have diminished though hopefully there are still savings and targets that you are working towards.
The main point in this decade is to stick to your budget and savings targets, don’t get caught spending above your means in regards to getting a bigger house or bigger car or family holidays. With the decreasing personal debts, money should be allocated towards an investment program.
Some of the steps you should be undertaking in this decade include:
- Set some more robust financial goals such as home improvements or larger house savings targets, potential investments (including family home) and repaying debt.
- Revised your budget taking into account any potential change in family situation
- Increased the size of your emergency fund
- Have paid off all or most of your student and personal loans and any credit card debts
- Start your investment program with a view to looking for investments that can eventually replace your income.
- Checking in with your finances and investments at least every quarter and checking in with your credit score once a year.
- Review your estate planning and personal insurances to make sure all contingencies are covered.
By now you should have settled into some healthy financial habits and should be well on top of debt repayment (including a house). All your finances should be automated including your allocation towards investing. Changes to loans and expenses may arise from needing a bigger house to accommodate a growing family and if applicable financial planning should take into account future education costs for your family.
Financial moves you should be making in your 40’s
Towards the end of this decade (and in your 50’s) is when your earning power in theory should be at its highest. The flipside to this is in this decade your lifestyle expenses are likely to be at its highest (particularly if you have children).
In this decade you should be well on your way to paying down any housing debt, (hopefully) have no personal or credit card debt (with the exception of a car loan/lease). If you have a family your education expenses are likely to have increased particularly once your children enter high school or even college.
One main point to note is once your home loan and other personal debts are repaid or very low, don’t take the foot off your savings and investment plan. With little to no debts and personal loans, increased focus should be on building your investment portfolio and increasing quality income streams that can replace your current income.
Some of the steps you should be undertaking in this decade include:
- Set some more robust financial goals such as home improvements or larger house savings targets, potential investments (including family home) and repaying debt.
- Revised your budget taking into higher lifestyle and education expenses if you have a growing family.
- Have paid off all of your student loans and have limited to no home and personal debts
- Keep building an investment portfolio filling it with quality assets that will grow and provide a nice income stream.
- Checking in with your finances and investments at least every quarter and checking in with your credit score once a year.
- Update your estate planning and insurances to take into account any changes in circumstances.
By now your focus should have or be close to shifting from repaying debt to building a quality investment portfolio that will eventually fund your retirement. When looking at investments, focus should be on quality with a longer term bias (given you likely won’t need to lean on these for 15 to 20 years).
A bigger focus should also be on your retirement account where you can allocate more of your savings given debt repayments should be lower. You should also be maxing these out and looking to get the maximum employer matches for any contributions.
It’s easy to put off thinking about your retirement accounts until you are well into your 50’s or 60’s however the sooner you take a more active interest in how this is invested, the quicker you will hit your retirement goal.
Financial moves you should be making in your 50’s
By the time you hit this decade you should have been full time in the workforce for 25 to 30 years and built a substantial asset and savings base.
In this decade you’ll likely hit your peak earning years and as a result hit your peak savings and investment years. All debt should be repaid in this decade and (if applicable) your children have completed their education and have left the family home to start their own lives.
This decade should also have a major focus in maxing out all retirement fund contributions, building your investments to eventually replace your current income and repaying the last levels of your debt.
Some of the steps you should be undertaking in this decade include:
- Drill down on your retirement goals and focus most of your finances on this
- Review your budget to focus on this retirement goal
- Maximize any surplus towards your investment portfolio and retirement accounts.
- Have paid off your personal debt (including home loans) and put in place a plan to begin paying down any investment debt before retirement.
- Turbo charge your investment program
- Keep checking in with your finances and investments at least every quarter and check in with your credit score once a year. .
- Address any estate planning and insurance needs.
Your healthy financial habits should now be second nature and debt should be extinguished with the focus on building your retirement accounts and investments. As your net wealth builds it’s likely your insurance needs should be decreasing though as you get older make sure your estate planning is up to date.
Financial moves you should be making in your 60’s
This is the decade where you can look to wind down (if you wish to). All personal debt should now be repaid and your retirement is within touching distance! Your financial goals should revolve around assets and income needed in retirement and from this you should be able to estimate potential retirement dates (either full retirement or moving to a part time job).
In this decade your retirement accounts should be building nicely, ready for your access at retirement. These retirement accounts should also be flanked with a quality sizable investment portfolio and these investments should be building up to a nice income stream that will partially or fully replace your personal exertion income.
The main point this decade is working towards your retirement (or at least ease back from full time work). in this decade is to stick to your budget and savings targets, don’t get caught spending above your means in regards to getting a bigger house or bigger car or family holidays. With the decreasing personal debts, money should be allocated towards an investment program.
Some of the steps you should be undertaking in this decade include:
- All eyes are on your retirement date, either full time retirement or moving to part time
- Maxing out savings and emergency fund in preparation for retirement
- Repaid all debt both personal and investment
- Your retirement accounts and investment portfolio keeps building and hits your retirement goal
- Determine whether you will choose to live in your current property or look to downsize into something smaller for ease of upkeep when retired
- Checking in with your finances and investments at least every month leading up to your retirement
- Make sure your estate planning is up to date taking into account retirement plans
This is all about your retirement and determining the income you will be able to generate from your investments and retirement accounts and what date this is possible. Whether you completely retire or move to a part time role (due to finances or wanting to maintain the social aspect) is up to you and your time frame.
Review your housing options in the lead up to your retirement, either to downsize your house or to move to another town or city. Review your insurances in the lead up to your retirement making sure you have sufficient health insurance in place and you have updated your estate planning needs.
These are just some suggestions to look at financially as you approach each of these decades. Of course life is full of ups and downs and your finances will also reflect this. There may be financial windfalls, pay rises and investment boons while there will also be job lay-offs, investment under-performance, relationship break ups and health issues that can derail the best financial plans.
Whatever happens, there is always a solution. Don’t lose hope. Yes if something bad happens this will set you back a little however minimize as much of this damage as you can by maintaining strong financial discipline, living within your means and investing (where you can) in strong, quality investments.
No matter what decade you are in you should be reviewing and setting financial goals, you should be setting up a budget, automating your finances and looking to build an investment portfolio as soon as you financially can.
By instilling strong financial habits and discipline in your 20’s or early 30’s this will set you on the path to achieving your financial goals a lot quicker. Stay the course, stick to your budget and your plans and you will be rewarded.