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Life Ed: Financial Strategies For Every Decade

Financial advisor Ashley Feinstein shares smart financial tactics for every decade, whether you're a teen, thirty-something, or soon-to-be retiree.
Consumer spending rose in February, disposable income too, the Commerce Department said.
Consumer spending rose in February, disposable income too, the Commerce Department said.AFP/Getty Images

Each decade requires a different financial plan, whether you're a teen just figuring out the money basics, a thirty-something trying to pay down debt, or a soon-to-be retiree trying to plan for life on a pension not a paycheck.

Here to provide guidance for every decade is Ashley Feinstein, a former investment banker turned personal finance coach who is the founder of Knowing Your Worth, and the author of the FiscalFemme blog, which works to empower young women with personal finance knowledge.

Couples should make time to talk about money and budgets to avoid friction.
Couples should make time to talk about money and budgets to avoid friction.Rob Daly / OJO Images/Getty Images

Achieving and maintaining long-term financial health requires a plan that evolves and grows as we move through life’s key stages – with each passing decade our financial expectations, means, responsibilities and priorities change, and so must our financial goals and strategies.

Your Teens

As a teen, you might be learning about personal finance for the first time. The new lingo can be overwhelming, as can the multitude of offers and marketing you begin to receive from credit card companies, banks, and other loan institutions. Don’t fret! Focus on understanding money basics.

  1. Protect and build your credit. Your credit score is a metric that represents your riskiness to people lending you money. Your score can determine whether or not you can get a credit card, mortgage or car loan and effects how much interest lenders will charge you.
  2. Beware of taking out too much debt, especially credit cards, as this will negatively impact your credit score.
  3. Understand the value of compound interest and start saving where you can. Interest compounds when you reinvest the interest and earn interest on interest. For example, if you have $100 that earns 5% interest, your money will grow to $105 in one year. Ten years later, at 5% interest, you would have $163. The earlier you start saving, the more time your money has to grow for you.

Your 20s

You are just starting out. You might not feel like you have much to put toward your financial goals because your career is in its early stages and you really just want to have some fun. You are new to the whole money thing and aren’t sure where to start. At this point in your life, your personal finances are the simplest they will ever be.

  1. Figure out how much you can contribute toward your goals by putting together a budget. This is one of the most simple and essential tools to your financial health.
  2. Create an emergency fund. I recommend that you stash away at least 3-6 months of expenses in an easy-to-access liquid account in case of the unexpected. This should be a top priority in your 20s as you want to protect yourself from taking on unnecessary expensive debt.
  3. Create a plan to tackle any credit card debt that you might have. While credit card debt is a reality for many young adults, it’s the most expensive debt out there. With interest rates of 20% not being uncommon, it can end up costing you a lot of wasted money in interest.
  4. Open a retirement account. Retirement might seem ages away, but due to the power of compound interest it’s important to start as soon as possible. The earlier you start saving, the less you have to contribute to reach your retirement goals.
  5. Don’t forget to have some fun! Put aside some money to treat yourself or to try something new. You work hard for it!

Your 30s

You now have a lot of financial priorities. Not only do you have to worry about yourself and potentially your partner, you might be planning for or actually financing some dependents, thinking about investing in a home, and ramping up your retirement savings. While it can feel like there are priorities pulling your money in all directions, it’s important to focus on the most important three or four goals -- with your current level of income, you can either make small movement toward many goals or big movement toward a few important goals. If you end up achieving those important three or four financial goals ahead of schedule, you can always start prioritizing new goals.

  1. Continue paying down your credit card and student loan debt. If you have any remaining credit card debt, paying this off should be your first priority. If you have any student loan debt, paying off the bulk of your loans will be another major financial goal in your 30’s.
  2. Reassess your insurance needs. With all the big life changes, it’s time to make sure you are protected. If you bought a home, look into home owners insurance. If you have a child, look into life insurance options. Make sure you are covered with disability insurance in the case you aren’t able to work.
  3. Start saving for children. While rising college tuition costs are at the forefront of our minds, there are many other costs associated with raising children that happen a lot earlier in their lives. Open a 529 plan for a tax advantaged way to save for your children’s tuition and start saving for the additional costs associated of raising a family.

Your 40s

During your 40s you are typically at the height of your career and these may be your highest earning years. With this new found wealth and success, temptation can be high to increase your lifestyle. There may also be more people depending on you for financial security than ever.

  1. Make saving for retirement your financial priority. You can contribute up to $17,500 in a company sponsored 401-K plan and $5,500 in an individual retirement account (IRA) each year. Estimate how much money you will want to receive each year in retirement, and then figure out how much you will need to have invested to achieve that goal.
  2. Make a will. A will dictates what will happen to your estate, which includes your money, possessions, dependents and property after you pass. Without a will, the state decides how your estate is passed on and this may not be in line with your wishes.
  3. Make a plan with your parents. With aging parents, it’s important to have a plan in place for their retirement and long-term care. If they are not protected by insurance or don’t have the assets to support their care, this financial responsibility may fall on you and can throw a wrench in your long-term priorities if you haven’t planned.

Your 50s

Those in their 50s are often dubbed the “sandwich generation,” because you may feel stuck between supporting your kids and taking care of aging parents. While these competing interests might feel overwhelming, it’s important to prioritize your needs first.

  1. Take retirement planning to the next level by making some very important decisions. Which health care options will you choose? With life expectancy the highest it’s ever been, you will also want to seriously consider long-term care insurance for yourself, which covers the cost of assisted living, nursing homes, home health care and other services related to long-term health care.
  2. Determine your target retirement date and retirement income. In order to achieve these targets it’s important to check in with your asset allocation or mix of stocks, bonds and cash, to make sure your portfolio risk is in line with your retirement goals.

Your 60s

You are now entering unchartered territory. You’ve planned well for retirement and are now enjoying your new post-retirement life. Your focus is now on living well within your means, maintaining and passing on your estate to those you love, and educating the next generation.

  1. Review social security benefits to see what’s available to you and plan accordingly. You can claim retirement benefits as soon as you turn 62 but this will impact your payments later in life. The longer you wait, the higher your social security payments will be.
  2. Check to see if you qualify for a pension from your current or former employer to factor into your retirement planning.
  3. Decide where you plan to live in retirement, and work to pay off your mortgage so that you are living debt free. You will still be liable for the property taxes and maintenance of your home, so if those costs don’t fit in your retirement budget, it might be a good idea to downsize. Where you retire will greatly affect how much money you need.
  4. Don't forget to include medical costs. Paying for health insurance before your qualify for Medicare can be very expensive. Calculate expected medical costs and plan accordingly.

Your 70s

At this stage in your life, with careful planning you should be living comfortably in retirement. Your main focus right now is looking after your loved ones, managing your estate, and enjoying life!

  1. Make sure your will is up to date and that you have made your estate as tax efficient as possible for those you are leaving it to.
  2. Consider spending some time educating your beneficiaries about your finances and how you wish for them to care for your estate once you’ve passed. You may also want to consider a living will, which outlines your preferred end-of-life care.
  3. Work through a retirement budget. Now that you are nearing or in retirement, you can actually put numbers to your retirement budget instead of using rules of thumb and estimates for planning. You might want to even test your retirement budget for a few months before you retire to make sure it fits with your lifestyle.

For more information and inspiration visit MariaShriver.com