Friday, October 27, 2017
The Top Financial Goals: From Your 20’s to Your 60’s
As life goes on, your priorities change. As life goes on your understanding of money changes as well. Things that were important to you in your twenties aren’t as important to you in your sixties. Your needs change and your wishes change. In order to get to that sweet spot of financial freedom, you have to build the house on a solid foundation. That can begin when you are younger, but there is no time limit. Obviously, the earlier you start, the better. In this post, I will go over some key financial goals for people in their 20’s all the way till their 60’s. Use these benchmarks as a guide to what we should all be thinking about as we get older.
In Your Twenties
1) Make a plan to pay back the student loan
Getting rid of the student loan is a huge accomplishment for any young person. The amount of it is usually more money than that person has ever had, so it seems daunting. Make a plan when you are in school to pay back the student loan as soon as you get out. You often get a grace period, (usually 6 months), before you have to start paying it back. Use that time to save up as much money as you can. While you are paying it back reduce all expenses. That will help you concentrate on knocking out the debt. Even if it means living with your parents an extra few years, get it done.
2) Cut the umbilical cord
When you are in your twenties you have to prioritize not needing your parents for financial support. Living with them while aggressively paying down your student loan is fine, the key word being aggressive. If you are only paying the minimum, then you are using them. If it’s to save up for a home, pay off debt or get your job situation sorted out that’s alright. You have to understand that nothing is free in the world and they are giving you a gift, so don’t be a bum. You don’t want to be dependent on mom and dad in your 30’s, it won’t be cute anymore.
3) Begin saving money
Even while you are paying off debts, you can save a little money on the side. Having that money there when you finish will make you happy and secure. Ideally, you should have begun saving money in your teens so if you didn’t, start now. Even if you make a very low wage in your twenties and never make more than that, you can be a millionaire when you retire. That is how powerful compound interest is.
4) Build and maintain credit
If you don’t have a credit card get one. Preferably one with a small limit and make sure you pay it back after you use it. You want to have your twenties as you break free years, so by the time you are 30, you are an attractive borrower. This will pay off come mortgage time.
In Your Thirties
1) Start making a healthy emergency fund
By now you are usually working full time, often at a job, you might be at for a while. You have to plan if that job wasn’t there or you couldn’t work at all. Paying off debt in your twenties means nothing if you are acquiring more in your thirties because of unforeseen circumstances. Experts say you should have 3-6 months living expenses in an emergency fund. Aim for the latter and go further. Make sure that is part of your savings plan.
Why You Need an Emergency Fund – Vanguard
2) Start Saving for retirement
I recommend that people start saving for retirement as early as possible. The problem is sometimes life gets in the way. In your thirties, you should look into opening a retirement account if you haven’t yet and start putting away 15% of you pay into it. This will add up quickly and soon after you won’t notice the money being taken from each pay. Get used to living on a little less and early retirement will be an option.
3) Be and stay debt free, other than a mortgage
Hopefully, you have knocked out the student loan. Hopefully, you aren’t racking up consumer debt while you are doing that. It is important to strive to live debt free while you are younger. These traits will stay with you for life and are often hard to break. While you are in the net worth building phase of your life, you will want to have debt under control. Start making interest, not paying it.
4) Allocate your money properly
In other words, use a budget. Make sure you are spending money on the right things during these years instead of wasting it. Using the pay yourself first method will make this easy. Spend what’s left over instead of saving what’s left over. This will help you maintain positive cash flow every month.
Pay Yourself First Method Broken Down – Investopedia
In Your Forties
1) Be properly insured
If you aren’t already, you must make sure you get properly insured. You work hard and are building a life and now would be the worst time for you to face financial hardship. Understand your group plan with work and if you don’t have one, seek personal coverage. Group plans often fall short of what you actually need, so look into it. Don’t let injury, illness or death slow down the family plan.
Protecting Your Assets – Budget Boss
2) Maintain debt-free status
These are the years where debt can really catch up with you. Chances are you are also making a decent wage as well so you can get into larger amounts of debt. Nip that in the butt and focus on having the positive monthly cash flow. The habits you start now or maintain from younger years will really pay off over the next decade.
3) Diversify your investments
Now is a great time to spread out your investment portfolio. Things like real estate can help you build your net worth and fit perfectly into your retirement plan. Use some of the money you have hopefully saved up to grow your net worth. Seek the advice of professionals and make calculated decisions.
In Your Fifties
1) Focus on paying off the mortgage
Having a paid off mortgage in your 50’s will allow you to use that money elsewhere. For most people, their mortgage payment is the largest expense they pay every month. Eliminating that will free you up to save like crazy. Have a plan to be done with the mortgage as soon as possible so you can live free in retirement.
2) Aggressively save for retirement
Chances are you are making more money than you ever have at this point in life. Take this time to throw as much into your retirement savings plan as you can. It is these high earning years that will pay off when you are 80-90 years old. By doing this you will not outlive your money, which should be everyone’s goal.
3) Start thinking about retirement
Do you know what you will spend in retirement? Do you know what you need to live on? Start thinking about what you want your retirement to look like, budget-wise, and take the steps to make that a reality. You still have time to get ahead of the curve but time also cannot be wasted. Sit down with a planner and have all your boxes checked.
Building Blocks of Financial Health – Budget Boss
In Your Sixties
1) Plan your estate
Do you know what you will leave behind? Now is the time to address estate planning. You probably have wishes that you want to be fulfilled, and paying the government taxes upon death is not one of them. Look at solidifying your estate and updating your will to reflect your wishes.
2) Achieve your retirement savings goal
If you have taken all the right steps in your younger years you are getting near that elusive retirement savings goal. Start thinking about withdrawal methods and amounts. Look at your Canada Pension Plan and Old Age Security amounts as a supplement and see how they factor into the equation. Open up a Tax-Free Savings Account if you haven’t as an overflow account. Take the necessary steps and have the plan ready.
Canada Pension Plan – An Overview
3) Focus on efficiency
Make sure you know the best tax-efficient methods of winding down your retirement funds. You will be paying tax, but you can mitigate the amount. Taking the right steps now can save you thousands over time and that can prolong your retirement savings well into your 90’s.
At any time in life, there are things to think about financially, from your teens to your 90’s. It is all about asking the right questions and also being asked the right questions. Your plan is just that, your plan. Make sure you do the things that fit what you wish your life to be, and you will experience financial freedom.
Thanks for following Goals Week here at Budget Boss. Don’t forget to tune in around noon on FaceBook for our live Friday Recap of the week with Six Five from Innovation Works in beautiful Downtown London. If you want help setting your goals shoot me a message at joe@budgetboss.ca. Have a great weekend friends!
“I don’t focus on what I’m up against. I focus on my goals and I try to ignore the rest.” – Venus Williams
Email – joe@budgetboss.ca
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