When it comes to personal finance, questions like these often pop up:
- How much should I have saved by 35?
- What should I have invested by 50?
- What do I need to focus on in my 20s?
These types of questions can create a lot of stress, and while they are common, they can also be misleading.
The truth is, one-size-fits-all financial guidelines are about as useful as relying on your astrological sign for investment advice.
Just because a so-called “expert” advises you to have 12 times your salary saved by age 42 or be invested in a precise blend of 50% stocks, 30% bonds, and 20% in alternative assets doesn’t mean that’s the best plan for you.
Your financial life is as unique as your personal life—where you live, what your goals are, what you do for work, how risky or conservative you are, what your expenses might be, and what makes you happy and fulfilled, all need to be taken into consideration.
Instead of getting caught up in arbitrary numbers and feeling like you’re constantly behind, let’s focus on the right financial habits and a successful money mindset.
So, let’s break down some essential habits and practical tips to focus on for each decade of your life.
Your 20s: Building Strong Habits
Your 20s can feel overwhelming with all the personal finance advice telling you what you “should” be doing. Instead of getting lost in the sea of advice, focus on establishing a solid financial foundation:
- Pay Off High-Interest Debt: Prioritize eliminating all consumer and credit card debt to free up your finances.
- Start Tracking Your Spending: Develop the habit of monitoring where your money goes to identify potential savings.
- Build an Emergency Fund: Save up at least 4 month’s living expenses as a cushion for unexpected events.
- Start Investing Early: Open an investment account and begin investing whatever you can, even if it’s a small amount. Investing early, even with less money, is better than waiting until later.
Your 30s: Avoid Lifestyle Inflation and Build Aggressively
In your 30s, it’s all about building on the foundation you set in your 20s:
- Understand what you want out of life: This is the building stage of your life and you co-create in this world. Do you want to get married? Have kids? Travel? What kind of life do you want to live? Will your legacy just be financial or something you want to do for the world? How much will that cost and what accounts need to be set up now?
- Save 10-20% of Your Income: Aim to save at least 10% of your take-home pay, increasing it whenever possible.
- Avoid Lifestyle Inflation: Be mindful of lifestyle creep—don’t let your spending increase just because your income does.
- Work Toward Becoming Debt-Free: Focus on paying off all debts except your mortgage to free up future income.
Your 40s: Maximize Retirement Savings and Plan Proactively
By your 40s, your focus should shift toward maximizing your retirement savings and planning for future needs:
- Max Out Retirement Contributions: Aim to maximize your retirement accounts, including both personal and employer-sponsored plans. I would challenge you to save at least 20% of your income to building wealth.
- Engage in Proactive Tax Planning: Work with an accountant or financial advisor to ensure your tax strategies are optimized based on your income, job, investment accounts, real estate. Remember: just because your accountant does your taxes doesn’t mean they’re looking for tax efficiency and strategy. You need to request tax PLANNING.
- Generational Financial Responsibility: This is where we begin to notice that we might have 2 generations to take care of – our kids and our parents. My experience with this as a Latina, is that my parents didn’t plan for themselves well so I will be the one figuring out their finances. It’s a very difficult task if it’s reactionary vs. proactive.
Your 50s: Focus on Wealth Preservation
Your 50s are a time to shift from wealth accumulation to wealth preservation:
- Legal documents: Making sure you have all legal documents prepared is essential at any age. 3 must have’s:
- Power of Attorney
- Living Will/Healthcare Codicil
- Trust or will
- Professional Management: By now, you would’ve accumulated a nice amount and my advice would be to make sure you’re invested appropriately. Adjust your investments to reduce risk, focusing more on stable assets. You can go to an advisor for a neutral perspective. Some advisors don’t have to manage your portfolio but can give you neutral advice. For example, some clients pay me to give them a financial plan but want to manage their own investments. Others want me to invest their money for them. It depends on what you need, but find a professional to check your investment strategy and financial plan.
- Review Your Retirement Plan: Ensure you have a clear strategy for drawing from your retirement savings to provide a steady income. This is a great time to consult a financial advisor who specializes in retirement planning to help you navigate factors like inflation, healthcare costs, and longevity.
60s and Beyond: Secure Your Retirement
As you enter your 60s and beyond, your focus should be on maintaining the wealth you’ve built and ensuring a secure retirement:
- Review Your Investments Regularly: Adjust your portfolio to match your risk tolerance and safeguard your savings against major losses.
- Solidify Your Retirement Income Plan: Ensure you have a clear understanding of your expected income sources, such as pensions, savings, and investments, to maintain your lifestyle throughout retirement.
- Go have fun!! If you haven’t fully savored life, what are you waiting for?? You worked your a$$ off for this very moment, so go have fun. Live life. Tell people you love, that you love them. Savor everything this earth has given you.
Strengthening your relationship at every stage
Remember, building a strong financial future isn’t just about numbers—it’s about adopting a healthy money mindset. Focus on what aligns with your personal goals and circumstances. By zeroing in on the few key actions that yield the biggest results, you can simplify your approach and maximize your success.
If you’re wondering whether or not your on track for achieving your goals, schedule a 20 minute assessment call with my team HERE
If you or someone you’re close to is a high-achieving professional who could use help establishing a solid financial plan and upgrading their money mindset, reach out to us. We’re accepting new clients and eager to help.
Scarlette Joyce
Money Mindset Coach
The information provided in this article is for informational and educational purposes only and should not be considered as financial advice. The content is based on publicly available information and does not constitute any recommendation to buy, sell, or hold any securities or investments. Past performance is not indicative of future results. Always consult with a licensed financial advisor before making any investment decisions to ensure they align with your personal financial situation and goals. Scarlette Joyce is a licensed advisor, but this article is not intended to serve as personalized investment advice.