Life Stages: How to Manage Your Finances Through the Years 

There are certain times in life when particular money management areas need special focus. The list below may remind you of areas of your finances that need special attention now or in the near future. Bear in mind that our stages are generalizations: some people are married with children in their twenties while others do not have dependents until their 50s, if ever. Whatever your situation, it’s important to plan ahead to accommodate the coming changes in your financial situation. 

20s 

This is a time when you probably finish your formal education and begin your first “real” job. Now is the time to start developing sound financial habits for a lifetime. 

• Establish credit and maintain a good payment record. Do not charge more than you can pay off in 3 months (or better yet, within the month). 
• Set up an emergency savings fund, typically 3-to-6 months’ living expenses. Keep this money as liquid (accessible with few, if any, penalties) as possible. 
•  Start learning about investing and establish an automatic savings program to reach your financial goals. 
•  If you can, buy a home, or start saving for the down payment. 
• Make sure you are taking full advantage of the savings benefits available to you through your employer: 401(k) or 403(b), et cetera. 
• Make sure you have adequate insurance coverage (life, home, auto, health, disability, liability). 

30s 

• If you have children, begin investing for their education. 
• Continue to keep credit under control and avoid paying finance charges and annual fees. 
• Write a will or review the one you have. 
• Review your insurance coverage in light of changes in your family situation, increasing assets, or professional activities. 

40s 

• As your income grows, look for investments and savings plans that shelter some of it from taxes. 
• Use a retirement planning software program or see a financial planner to figure out exactly how much you’ll need to have saved to maintain your lifestyle in retirement. 
• Step up personal and employer-sponsored retirement savings accordingly. 
• Review your investment allocation and make sure you are still well diversified. 

50s 

• Review your will and estate plan. 
• Pay off your debts. Depending on the going rates for different types of investments, it may or may not be wise to pay off your mortgage now. 
• Maximize your savings for retirement. 
• Make sure your growing assets are protected by liability insurance. 

60s 

• As you near retirement, switch a portion of your investments to low-risk types to produce income rather than higher-risk growth. 
• With life expectancy increasing, make sure a portion of your retirement nest egg is invested so that it continues to outpace inflation. 
• Maintain your health and long-term-care insurance. 
• Remain wary of scams aimed at seniors.