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3 crucial money decisions for every decade of life
These targeted goals will get you on the right track
 
How she saves money for the next decade will look different than her parents' plan.
How she saves money for the next decade will look different than her parents' plan. (iStock)

You know the saying, "Life is a marathon, not a sprint"? Well, it's actually a good money mantra too.

Translation: All too often, we race through the nitty-gritty details of our finances and neglect to focus on crucial to-dos in the process — like saving for retirement long before those golden years approach.

But if you adopt a marathon approach to money, it can allow you to take a more holistic look at your overall financial picture to see how decisions that you make in your 20s and 30s can impact your 40s, 50s, and beyond.

Of course, no matter how old you are, financial health usually boils down to the same three basic goals: paying off credit card debt, growing your emergency fund, and saving for retirement. But the way you approach these tasks — and other money priorities — may change as you age.

That's why we tapped Natalie Taylor, a CFP® with LearnVest Planning Services, to help make it simpler for you to begin taking more of a marathon tact with your finances by highlighting three of the top money to-dos she believes should be on everyone's radar in their 20s, 30s, 40s and 50s.

Three of the top money to-dos for your 20s

This is the time when you should be laying the groundwork for a bright financial future, Taylor says. One of the best ways to start? Consider creating a budget and tracking your expenses — then test it out for several months to make sure it's realistic for you, adjusting it as need be. "This seems like a basic step, but a lot of people miss it," Taylor adds.

The reality is that your finances are likely a lot simpler now than they will be in the future, when you may be juggling priorities like saving for a down payment on a house while also starting a family. So this is why your 20s are an ideal time to establish good money habits — like getting that emergency fund going — that can help carry you through the next decades.

1. Tackle credit card debt

It's easy to think that delaying debt repayment until you're older and making more money is a good idea, but this strategy rarely pans out. Because as you make more, your expenses usually increase too.

"Instead of renting, you're now going to buy a house, or you're combining finances with a partner, or you decide to have a family," Taylor explains. "All that extra money that seemed like it would make things so much easier suddenly isn't there."

This is why now is the time to work on breaking the credit-card-debt cycle for good — but make sure you're approaching this goal strategically. A common mistake to avoid? Making giant repayments when you haven't properly budgeted for them.

It may seem like a good idea, but you risk running out of cash and then having to withdraw it from your savings account, or worse, running up your credit card bill again just to stay afloat. Instead, take a more measured approach, and be realistic about how much you can afford to repay at once — then stick to the plan.

2. Start an emergency fund

While you're busy paying down your debt, don't forget what you should be building up: emergency savings. To help accomplish this goal, Taylor suggests setting up a direct deposit from your paycheck into a high-yield savings account, so you aren't tempted to spend that money before you can save it.


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Ideally, you should aim to have six times your take-home pay saved up in your emergency fund. But if that figure seems too lofty a goal, your number-one priority is to save one month's worth of income. (We hereby give you permission to focus on this goal even before working toward others, like paying more than the minimum on your credit card bill.) Then graduate to a goal of three months' worth of pay — and build up from there.

3. Get in the habit of saving for retirement

At this point in your life, retirement is far off, and your 401(k) probably isn't the first place you want to put any extra hard-earned cash. But it can be important to start saving as early as you can: Even small amounts can make a big difference over time, thanks to the beauty of compound returns.

Start contributing a percentage of your paycheck that feels reasonable to you, and then plan to increase it by 1 percent every six months until you max out. And don't forget to fully take advantage of an employer match if your company offers one — otherwise, you're leaving free money on the table, and trust us, you'll probably need it later.

Three of the top money to-dos for your 30s

During this decade, your financial goals are likely to get a bit more complicated. Many people are still paying off credit card debt and student loans, working on building emergency savings, and kicking retirement savings into high gear — while also saving for a house down payment and perhaps thinking about starting a family.

So what's the secret to juggling it all?

You can't just work on one goal at a time, but you also don't want to spread yourself too thin, Taylor says. "I look at income like a fire hose," she explains. "If you try to fill too many buckets, none of them are going to get very full."

So she suggests narrowing it down by focusing on your biggest three or four goals. If you haven't mastered the big three — paying off credit card debt, building an emergency fund, and minding your retirement savings — then those should automatically be your top priorities. But once you've addressed your basic financial security needs, you can start contributing to other goals, like saving for a house or your kids' college.

1. Continue to hack away at debt

If you're still paying down your credit card balances, concentrate on the card with the highest interest rate, while paying the minimum on the others. This will help free you up to focus on other financial priorities sooner — and help you pay less in the long run.

Ideally, you should also be close to paying off your student loans in your 30s — or, at least, paying down a significant chunk of them. If you have low interest rates (under 4 percent), there's no need to rush to pay them off, enabling you to contribute to other financial goals in tandem. But if you're paying higher interest rates (6 percent or more), tackling those loans as quickly as possible should be top of mind — and your to-do list — after you've achieved financial security.

2. Grow your kids' numbers too


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Little ones may also be entering the picture, and you'll probably have to plan for child care costs, as well as starting to save for college. For the latter, consider opening a 529 plan and contributing what you can now to help defray tuition costs and other college fees down the road. Just remember that not all college savings plans are created equal — those sold by investment advisers tend to carry higher fees than 529s you can buy directly from the state, for example — so do your homework before deciding which one is best for your family's needs.

3. Reassess your insurance needs

Big life events — getting married, having kids, buying a house — can be trigger points for examining whether your insurance needs are being appropriately met. If you have dependents, securing life insurance now will help them maintain financial security in the future if anything should happen to you.

To further protect yourself and those you love, you should also consider both short- and long-term disability insurance in the event that an injury or illness ever prevents you from earning an income, adds Taylor. Start by looking into group policies available through your employer. Otherwise, you can shop around for the best life and disability rates with different insurance carriers or work with a broker you trust. Just keep in mind that they're usually earning a commission.

Three of the top money to-dos for your 40s

This is the decade to consider really hunkering down and making sure you're on top of your money. At this point in your life, you probably want to be out of the credit-card-debt cycle and have your student loans paid off. And as you make more, don't forget to keep padding your emergency fund if possible and revisiting your retirement projections — while also paying attention to other ways to grow your money.

1. Make retirement savings your priority

If you have kids, you may be feeling the need to put your retirement savings on hold in favor of saving for college tuition. Well, as the old saying goes: You can borrow for college, but you can't borrow for retirement.

During your 40s, it's critical to understand how much you should be saving for retirement — and help ensure that it comes first. So you should probably only consider putting money into junior's college fund if you've paid off bad debt and student loans, have a solid emergency fund and your retirement savings are on track.

Now is also a great time to consider how you can pad your nest egg with freelance or consulting work on the side, which can also help enable you to set the groundwork for having more income-generating options once you've stopped working full-time.

2. Focus your investments

Although you may not have paid much attention to portfolio management in your 30s, you've probably started accumulating some wealth by your 40s. These are typically your high-earning years, which makes it a good time to become more thoughtful about whether you're investing in the right way.


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"It's important to do goal-oriented investing," Taylor says. What this means is that every investment has a purpose or goal associated with it, enabling you to invest each account according to your time horizon and your risk tolerance for each goal. For example, if a portion of your portfolio is earmarked for your kids' college fund, and they are less than 10 years away from high school graduation, consider making sure your investment allocation for that account is more conservative than funds you're saving for a retirement that's decades away.

3. Splurge — within reason

Just because you're making more money doesn't give you license to get too big for your financial britches. "People often fall into this pattern in their 40s," says Taylor. "All the other stuff is settled, and things are simpler from a financial standpoint."

So before you take off on that three-week trip to Tahiti or embark on a pricey home renovation, make sure your financial picture is truly in tip-top shape. "I'm all about balance — savoring what you spend and enjoying life today, but also planning for tomorrow," says Taylor. "As long as important financial goals are being met, do the remodel or take that dream vacation."

Three of the top money to-dos for your 50s

Welcome to the "sandwich generation" years, when you may start to feel stuck between supporting your kids and taking care of aging parents.

But while you'll likely be facing many pulls on your money, it's OK to put yourself financially first. After all, there's a lot that should still be on your radar: retirement, long-term care for yourself, mortgage payments, and portfolio management — just to name a few.

1. Revisit your savings and investing goals

Your 50s are a key time to fully prep for retirement, whether it's five years away or 15. At this point, says Taylor, you should be "all in," saving as aggressively as you can.

So portfolio management can become even more critical now. "It's time to focus on preparing your portfolio to shift from growth to a combination of growth and income," says Taylor.


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Typically, this means reducing risk, which can be accomplished by reducing stock holdings and increasing the percentage of bonds. "You'll also probably want to re-examine the fees you pay within your portfolio, and look for a discount brokerage firm to hold your accounts with low-cost index funds and exchange-traded funds available," adds Taylor.

As you get closer to retirement, your emergency savings goal should now be one to two years of cash. "This way, if a '2008' hits the year you retire, you can just spend cash," says Taylor.

2. Prioritize your needs over that of your kids

During this decade of life, "I see a lot of clients struggling with figuring out how much they can afford to support a grown child," Taylor says. Bottom line: Even though it can be tough, continue to put yourself first. "The clock is ticking, and there's a very real possibility you may not get to work as long as you want," adds Taylor.

3. Make key retirement decisions

"Many of my clients say, 'I don't really know what health insurance covers. I don't know what Medicare covers. I know it's something I need to think about, but I've heard long-term care is crazy expensive,' " Taylor says.

Well, now is the time to get educated.

"Learn about what long-term-care costs can look like, look at your finances to see what the impact would be if long-term care were needed for you or your partner, and then decide if insurance is the best way to meet that need or not," Taylor says. "Don't wait to make the decision until your 60s, when it gets really expensive."

You'll also probably want to revisit your estate plan — your last will and testament, living will, power of attorney — and confirm that your beneficiaries are up-to-date on your life insurance and retirement accounts. Prepare a similar form — called "transfer on death" — for all your taxable accounts including checking, savings and brokerage. "You want to make sure you're planning for the next 20 to 30 years today," Taylor says.

This story was originally published on LearnVest. LearnVest is a program for your money. Read their stories and use their tools at LearnVest.com.

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