In your 20s? Get that emergency fund going.

Advertisement
money
Credit: Getty Images

Remember playing The Game of Life as a child? You'd load up your tiny plastic peg person into their tiny plastic minivan and set them off on the board. As the game progressed, you'd make life choices: deciding to get a degree or not; becoming an artist or an accountant; buying either a log cabin or a Dutch Colonial; and eventually, almost always, getting married and having children. When the game ended, all of the players counted the value of their assets and their cash to find out who'd become the richest player. It's a decidedly American game.

But it's not actually representative of how everyday Americans live their lives. While there certainly are professional, personal, and financial milestones that many of us will pass through over the years, there's no one right way to line them up.

"Goal setting and milestones are absolutely imperative when we are thinking about our financial wellness," says Lindsay Bryan-Podvin, LMSW and a financial therapist. That said, she adds, "this idea that you have to be doing something in your 20s, 30s, 40s, and 50s—I think of those as more as guidelines. It's blanket advice that doesn't apply to everybody."

She gives an example: "Plenty of people don't have kids, myself included. I'm child-free by choice, so having a 529 [college savings] plan will never be on my radar, because that is not a goal that I am saving for."

That being said, knowing what those general guidelines are can be a good first step to deciding whether they'll work for the kind of life you want to lead and the kind of financial goals you have. 

Linda Davis Taylor, former CEO of a wealth management firm and a financial literacy expert, shares that she thinks about setting milestones in terms of different decades of life. "Looking at it from a lifecycle standpoint makes so much sense. It's really easy to define that way," she says. "You can't do everything at once, but [you can] always be thinking about what's ahead and what are your goals."

If this sounds like something you're interested in doing—no matter what age you are now—read on for experts' suggestions on which financial milestones you can set for each decade of your life. 

In Your 20s 

This is the decade to really determine your money mindset, or your values and habits around money. "It's understanding the relationship between what you earn, what you spend, and what you save," explains Davis Taylor. 

As far as what to do with your money, she adds that the most important thing at this stage is to build up an emergency fund. That means setting aside some percentage (like 10% or 20%, if you can swing it, but less is okay too) of each paycheck, even if you're paying off student loans, until you have three months of living expenses saved up. That way, if you suddenly need to change jobs or have unexpected medical expenses, for instance, you'll have the cash on hand to cover the cost. Of course, this isn't easy to do, but it's absolutely worth making the effort.

"It gives you the independence to go ahead and make a change," says Davis Taylor. "There's freedom in making your own choices, without being beholden to anyone else." 

In Your 30s 

With some savings behind you, your 30s can really be around exploring what you want out of your career and what your earning potential might be, says Davis Taylor. Whether you're on a corporate path or have decided to launch a small business, you should be investing, she adds. If your company offers a 401k, contribute the maximum amount you can, particularly if they match contributions. If you're on your own, consider a Roth IRA. 

However, if your income isn't enough to be saving extra, or even to start thinking about retirement, know that you're not alone. The Federal Reserve found that a quarter of U.S. adults have no retirement savings. If you can't swing a lot of savings all at once, try automatically saving small amounts—1% or 2%—since even just a little bit can make a difference.

money2
Credit: Getty Images

If you do happen to have money left over after paying your expenses, keeping your emergency fund topped off, contributing to a retirement account, and paying off outstanding student debt, put that extra cash in a brokerage account to start saving for other goals. "Time is your friend with investing," says Davis Taylor. "The sooner you can start, the more it's going to grow, no matter what the stock market is doing day-to-day."

Don't forget to talk to your partner about all of this. "If you have a partner or a spouse, that brings money into the bigger picture because you're doing it with somebody else," says Davis Taylor. "It's really important to establish a healthy, open, and candid communication plan." That means getting in sync on your values around money, your shared goals for the future, and your spending and savings habits. Bryan-Podvin suggests opening that conversation with a gentle warm-up, like "One of the things I would love for us to work on this year is our finances," or "I noticed we ordered a lot of take-out last month—could we spend some time getting on the same page about how much we want to spend on food?" 

This is especially important for millennial women, with 61% of them leaving important investment and long-term financial planning to their spouse, per a 2018 UBS survey. The poll cites societal expectations of men as breadwinners and women's historical lack of confidence in finance matters as the reasons behind that low participation rate. With that in mind, do your best to "be an equal partner," implores Davis Taylor. 

In Your 40s 

"This is when a lot of us face the biggest expenses that are going to happen in our lives," such as home ownership and saving for children's higher education, explains Davis Taylor. "Most of us have to take out loans to do so. [Ideally], we have good habits, no credit card debt, and savings for a down payment."

But remember, even if you aren't debt-free or swimming in savings, don't punish yourself—instead readjust for what's realistic. "So much noise in the personal finance space is about restriction and guilt: 'Don't spend money on this,' 'If you have debt you're bad,'" says Bryan-Podvin. "It makes us as individuals feel like we're bad with money, or we didn't do the right thing, or we weren't smart enough, which only further pushes away our ability to cultivate a healthy relationship with money."

Instead, she suggests setting "small, bite-sized goals" that you know you can achieve, like breaking up saving for a new car into small monthly deposits to be done over the course of a few years.

In Your 50s

For many women, their 50s are usually their most lucrative earning years, says Davis Taylor. This is a decade for maxing out your earning power and investments by negotiating for aggressive salaries and contributing excess earnings into brokerage accounts.

"God willing, we're all going to get to our 60s, so your 50s are really important…[because] in your 60s, a lot of people want to have the option to stop working so much, or health problems or life surprises crop up," she explains. She recommends starting to consider what kind of transition you want between work and retirement at this stage.

money3
Credit: Getty Images

In Davis Taylor's case, she started planning for retirement in her mid 50s, 10 years before she actually retired, to prepare for it psychologically and financially. 

In Your 60s 

In America, the age at which adults can retire and have their Social Security benefits kick in is currently 66, but it'll be 67 by 2022 and might keep getting pushed upward. That's mostly because of solvency issues with Social Security benefits, but it aligns with sociological reasons why people keep working: It gives them a sense of purpose, it keeps them sharp, and it allows them to have greater income during a time of ever-increasing healthcare costs.

So your 60s might not be all about retirement, by choice or by necessity. But you still might want a change, notes Davis Taylor, whether in the type of work you do or leisure activities you enjoy. "By your 60s, a lot of people find that they're ready to have more time to do other things, to do new careers, new pathways," she says. 

From a financial milestone perspective, she adds, this is the decade where you'll start adjusting your investment holdings to wind down your risk, like moving away from stocks and into bonds and annuities.

In Your 70s and beyond

Once you reach your 70s, if you haven't yet stopped collecting a salary, you probably will at some point in this decade, so you need to be ready to live without a paycheck, says Davis Taylor.

"If you've gotten to that point, with good luck and good fortune, you're living differently—you have to make sure your money is going to last," she adds. 

Part of that means making sure you have a solid estate plan in place, if you haven't invested in one already. That may include a will, funeral and health directives, and plans for your belongings. While you should start setting up a will as soon as you have assets, you'll want to find an estate attorney who can help you formalize who you'd like to inherit your belongings and what you would want your family to do in the case that you were medically unable to make your own care decisions.

Additionally, if you haven't had time to engage in much charitable giving or volunteering earlier in life, retirement is a great time to do that. "It gives you a sense of ownership, participation, and impact, and it's really good for you," says Davis Taylor.

Keeping perspective

Whether you're in your 20s or 60s, already fully prepared for the future or just focused on getting through the present, it's important to remember that money is not everything. While money can deliver a secure lifestyle and safety, particularly for people who struggled to have financial security growing up, having it is not enough to guarantee those things. "We have this myth in the United States that if you have money, you will be happy," says Bryan-Podvin. "A lot of my clients are struggling with the weirdness of 'I have money and am checking all these boxes, but I'm still experiencing a lot of emotional and psychological turmoil around my money.'"

That's especially true now, while we're still living through a pandemic and dealing with its psychological, physical, and financial repercussions. 

"One of the best things that we all can do is acknowledge that if we are here...we have survived a global pandemic, and all of the trauma that has come with it," says Bryan-Podvin. "[That means] practicing a ton of compassion and empathy toward ourselves, which includes our financial goals."