Money will be an essential part of your daily life for your whole life, and as an adult, how you manage your money will have an impact on your security, health, and happiness. That being said, research shows that only 60% of home-owning adults take an active interest in managing their finances or even have a monthly budget.
While managing your monthly finances might seem like an overwhelming task, it is a necessary one if you wish to enjoy your daily life and secure your family’s future – and who doesn’t want to do that? While everyone’s financial needs might differ depending on their individual circumstances, needs and dreams, the three major goals of a basic financial plan include paying off debt, savings (think investments and a healthy emergency fund), and planning for retirement. But the way you achieve those goals will change depending on your age.
In today’s post, we are going to have a quick look at the major money decisions you should be making in each decade of your money-making life. Use these as a way to get you thinking about how you manage your finances in relation to your life stage and what’s coming next for you and your family.
Smart wealth management decisions per decade
1. In your 20s
This is the decade where you are either involved in higher education studies or have started working full-time. For many people, this decade is the start of their wealth management journey and, most often uncomplicated by the needs of a family, this is a good time to lay the foundation for a solid financial future. Take the time to work out a budget that includes saving for the future and for an emergency fund. And don’t forget about saving for retirement – it might seem like a long way off but the sooner you start putting away money for a time when you are no longer working, the more comfortable that time in your life will be. If you incur any debt, make sure you have a debt management plan in place and that any credit cards or loan accounts are paid off timeously and quickly – compound interest makes debt a financial freedom killer. Establishing good money habits in your 20s will help you maintain financial stability in later decades.
2. In your 30s
The thirties tend to be a time of increased responsibility and finances tend to be more complicated – you might be making more money than you did when you were younger but you will have more on your plate than ever before – a bond, student loan repayments, credit card debt, as well as the costs that come with a growing family and an increased focus on retirement savings, etc. It’s important at this stage of your life to focus on your big financial goals rather than spreading your finances too thin. Continue to address your basic financial needs – debt repayment, savings, and retirement planning – and then work on other important financial goals such as tackling your biggest debts first (those with the highest interest) and planning for your children’s financial needs such as child care and education. At this stage, it would also be wise to review your insurance plans. Big life changes require changes in insurance management – from life insurance to protect your dependants to income protection and disability insurance should the worse happen.
3. In your 40s
This is the decade for focusing on making the most of your financial plans and staying on top of your money and financial goals. Loans should be paid off and you should be placing more money into your savings, emergency fund, and retirement planning (never give up on your retirement planning). It is also essential to think about other ways to increase your wealth, specifically through investment opportunities (which can best be achieved with the help of an experienced independent financial adviser). Every investment you make should have a defined purpose in line with your tolerance for risk and an appropriate timeline. If you are financially stable and all your goals are in place, this is also the decade to enjoy your money – no need to go overboard but take that holiday and finish that renovation.
4. In your 50s
Welcome to the sandwich generation – at this stage of life, many people find themselves stuck between the needs of their young adult children and their aged parents. Despite these competing needs, this truly is the time to focus on your financial prosperity. If you put your needs first – retirement, savings, and investment management – you will actually be caring for your dependants, preventing you from becoming a burden on them at some point. You should be all in when it comes to your retirement, long-term care plan (which can be complicated and expensive) as well as ensuring your investments are balanced between income and growth. If you haven’t already, you should definitely have a will in place and a plan for your beneficiaries’ future.
Managing your finances is a lifelong process and in order to ensure the best chance of financial stability and prosperity, it’s important to constantly evaluate and review your position. Getting expert help can also be a wise money move – speak to an independent financial adviser about how to balance essential financial steps with your individual needs.
As independent financial advisers with decades of experience, the TRG team is perfectly positioned to offer you financial guidance and insurance and investment options tailored for each stage of your life journey.