Managing Your Money in Every Stage of Life

Your financial priorities will naturally change over the course of your life. But regardless of your age, it’s important to get clear about your current goals so you can manage your money to meet them.
 
Everyone is different, but here are some general tips for adeptly managing your finances throughout the chapters of your life.

The Launch

As you embark on your career in your twenties and thirties, it’s important to build a solid financial foundation.
 
You might have various goals, the best way to begin is to create a spending plan. Follow these tips on how to make a budget.
 
If you attended college, create a strategy to start paying down any student debt. Meanwhile, try to sock away enough savings to cover three to six months of living expenses. That way, if financial challenges pop up, like a sudden job loss, you’ll have a safety net to catch you. Learn more about why you should have an emergency savings fund.
 

Start contributing to a 401k or a 403b if your employer offers one. And if your company offers to match your contribution, grab that offer, which could double your retirement savings. If you contribute 3 percent of your salary to your retirement account and your employer matches employee contributions up to 3 percent, for example, you’ll boost your savings to 6 percent. So you’re essentially getting free money.
 
Entering adulthood also means getting health insurance (which may be offered by your employer) and, of course, auto coverage. Also, consider purchasing life insurance now, while you’re young and it’s relatively inexpensive. Then if something happens to you, your spouse and (current or future) children won’t face money troubles without your income.
 
Hoping to buy a home? Start to save toward a down payment. If your budget is tight, consider these ways to save money for a goal.
 
Need some help creating a financial roadmap? Consider talking to a financial advisor, who can offer expert guidance.

Mid-Career Years

As you amble into mid-career, it’s time to build on the foundation you’ve laid.
 
Think about your goals moving forward. Do you want to send your kids to college? If so, you might want to set up and begin contributing to a college savings account. Most states offer a tax-advantaged 529 college plan such as California’s Scholarshare 529.¹ Another way to save for your budding scholar is with government-issued EE savings bonds (guaranteed to double in 20 years) or Series I savings bonds. Learn more at Treasury Direct.
 
To ensure that you’ll be on solid financial footing when you reach retirement, try to trim down debt to 50 percent of the value of your total assets. Then, to boost your retirement savings, consider upping your investing to 15 percent of your income or more.
 
Check in with your financial advisor to get pointers on how to position yourself well for retirement and create an estate plan so your heirs will know your wishes after you pass. Your advisor can also help you optimize your taxes, for example, and review your insurance policies to see if any adjustments need to be made.

Readying for Retirement

In your fifties, your focus may be shifting toward retirement. Your income has likely grown, perhaps your home is paid off, and your kids have left the nest (or will soon).
 
This may free up some cash, allowing you to pay off any outstanding debt and (if you aren’t already) contribute the maximum to your retirement account to speed its growth.
 
This is, once again, a good time to meet with your financial advisor to review your estate plan and update it if need be. You might decide when to retire and begin taking Social Security benefits, and school yourself on Medicare. This is also a good time to buy long-term care insurance, which will defray the costs of long-term in-home care or nursing care, should you need it.
 
In the meantime, new responsibilities may pop up. If your parents’ health is declining, you may want to help care for them – and perhaps your spouse’s parents as well. Your financial advisor can help you make decisions about how best to do that.
 
Concerned that you’re not prepared for your post-work years? Don’t panic. Here’s some advice if you haven’t saved enough for retirement.

Saving Habits by Generation

Financial advisors generally suggest trying to save 20 percent of your income. Baby Boomers and Gen Xers are the least likely to do so, saving 18 percent and 17 percent respectively, according to the American Bankers Association. Meanwhile, 47 percent of Gen Z and 36 percent of Millennials save at least 20 percent of their income.

The Golden Years

The good news is that most people don’t need as much money in retirement as they did when they were working. Your home and car may be paid for, Medicare will likely pay the bulk of your short-term health care costs and, depending on your income, you may not pay taxes on your Social Security benefits.¹
 
To make sure you’ll be covered, revisit your monthly expenses as well as your income and assets – including Social Security, pensions, retirement accounts and such – as well as your monthly expenses.
 
If you find that you need to rein in costs, consider downsizing. If your kids have left the nest, you likely don’t need the same space you once did. If you’re faced with a large expense or simply need to supplement your income, you might decide to borrow against your home equity or embark on another strategy. Your advisor can help you weigh your options.
 
¹ Please consult a tax advisor.
 

 
Sources:
 
National Council on Aging, Financial Targets by the Decade, published January 4, 2021.
 
Experian, Do You Really Need to Save Three to Six Months’ of Expenses? Published August 19, 2023.
 
Kiplinger, Financial Planning by Life Stage Focuses on You, Not Your Age, published September 12, 2023.
 
FINRA, College Savings Accounts, accessed December 17, 2024.
 
Financial Security Project, Managing Your Money in Retirement, accessed December 18, 2024.
 
American Banking Journal, Learning the savings habits and preferences of each generation, published October 30, 2024.
 

 

 
This article was created in accordance with the Patelco editorial policy.