How to Set Your Financial Priorities, from Your 20s to Your 60s

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If you were a smart kid and started saving your allowance in a piggy bank or sneakily kept the change from a $20 when you bought milk for your mom, you probably already realize that your financial priorities change over time. A handful of quarters or fistful of dollar bills served you well as a preteen, but as we age, so should our money management goals.

Feeling pulled in different directions when it comes to saving money for an emergency, a house, tuition, and retirement? For help on how to establish priorities based on age, we asked financial advisors to weigh in. Naturally, you'll have some very specific individual goals. But these guidelines will help you rank what's important to you right now.

20s: "With a trend toward marrying later in life, most of your 20s are spent with little to no obligation to other people," says Brandon Moss, managing director at United Capital in Dallas. "This is prime time to lay a sound financial foundation and develop key habits that will help you for the rest of your life. You can't win or lose your financial life in your 20s, but just getting started gives you a tremendous leg up."
  • Save. Too many people make the mistake of saving only in their 401(k), Moss says. "Once the money is in the 401(k), it can't come out until you're 59½ (with limited exceptions). Be sure you're also saving outside your retirement accounts for when you need new tires or it's time to buy a house."
  • Automate the budget. No one likes or wants a budget, so why even do it? says Moss. "Focus on automating as much of your financial life as possible -- automate your savings, bills and obligations, and giving," says Moss. "Anything after this is yours."
  • Skip the BMW, but be sure you set aside some fun money. "Enjoy your 20s, just be smart about it," Moss says, using the example that $200 per month in savings in your 20s (compounding and earning interest) will grow to between $40,000 and $50,000 after 10 years and around $250,000 after 40 years.
  • Address your debt. Stay on top of any money you've borrowed to pay for significant expenses -- such as school or a car. Know what you owe, and establish a system to pay it down as quickly as possible.
30s: For those who have kids, your 30s are the time to take steps to instill financial responsibility in your children, suggests Suzanna de Baca, vice president of wealth strategies at Ameriprise in Minneapolis. "Guiding them on a path to financial independence is positive for them, but also good for your own financial future. Teach your kids to spend and save responsibly, and lead by being a positive influence," she says. Also, especially now that you have kids, be sure to establish a will and guardianship plan.
  • Don't crack the foundation. Get serious about laying one down, says Moss. "The good news is it's not too late," he says. "All of the above from your 20s still applies. And it's OK if you start them in your 30s, it's just a bit more difficult."
  • Discuss finances with your partner. If you have a significant other, now is the time to get on the same page financially.
  • Weave a stronger safety net. Having an emergency fund is important at every age, but especially as your family grows, which increases the chances of a surprise financial need arising.
  • Consider life insurance. If you have obligations, such as kids and a house and a car, what would happen if you weren't around? Life insurance is the simplest and easiest way to address this question, says Moss. Shop around and be sure to focus on term policies, not whole life policies (which tend to have an expensive investment element tacked on).
40s: "It's gut-check time," says Moss. "Real decisions need to be considered, and it's more important than ever to be on the same page as your significant other."
  • Know where you stand. If you haven't done this yourself, or you want a second opinion, pay to sit down with a professional who can give you a baseline for where you stand in terms of saving for retirement and any specific goals you have. A fee-only certified financial planner is a great place to start.
  • Understand the trade-offs. "If we pay for the kids' college, do we have to delay retirement for four years?" These are the questions you need to start asking and getting an idea of what each means for your financial life, says Moss.
  • Get serious about contributing to your 401(k). If you're not getting the maximum match from your employer, then you're probably not going to get where you want to be in the future, Moss says. Take advantage of all the tax breaks you can get for savings, both in your 401(k) as well as a Roth IRA (if you qualify) in order to supplement your employer-sponsored retirement savings plan.
50s: "These are typically your peak earning years and your peak savings years," says Jeremy Kisner, author of "A Good Financial Advisor Will Tell You..." and a certified financial planner and president of Surevest Wealth Management in Phoenix. "Your kids are typically grown and on their own. Child care and related expenses disappear. Mortgage payments that were a stretch when you first bought your home have become more affordable because the payments remain level but your household income has increased."
  • Tackle big debts to eliminate them before retirement. Develop goals to pay off your home and other large loans so they are not looming later in life, says Kisner.
  • Take advantage of catch-up contributions. "If you're already saving for retirement but have the ability to increase the amount you're contributing to your 401(k) or IRA -- do it!" says de Baca. "If your savings are lacking, don't panic, but recognize that you might have some catching up to do. The good news is, after age 50 you can make catch-up contributions to most retirement plans."
  • Consider long-term care insurance. "The average age at which long-term care insurance is purchased is 57," says Kisner. "People who wait until their 60s frequently don't buy the insurance because it's too expensive at older ages."
60s: "These should also be peak saving years," says Kisner. "However, it should be pointed out that more than 40 percent of workers are forced to retire earlier than planned due to medical reasons, corporate downsizing or layoffs, or the necessity of taking care of elderly parents."
  • Determine if/when you can afford to retire. "Develop a lifetime income plan as you decide about when to take Social Security or pension options, whether to keep rental properties or vacation homes, etc.," says Kisner.
  • Consider downsizing. You should start to focus on where you want to live and what type of home you want for your retirement.
  • Do your estate planning. If you don't already have a will, put it at the top of your to-do list, says de Baca. If you have one in place, make sure it still reflects your current wishes and that all your beneficiary information is up to date.
  • Evaluate your insurance needs. You may no longer need a life insurance policy to protect your family, but some affluent families opt to buy one to leave money behind for their heirs, says Kisner. Some long-term care policies also include a death benefit.
"Regardless of age, one thing I always like to tell people is, "It's OK to not be OK,'" says Moss. "Money is tough, but it doesn't have to be all-consuming. No matter where you are, it's never too late or too difficult to right the ship."

Michele Lerner is a Motley Fool contributing writer.‚Äč

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This is a good well-written basic financial article. I particularly liked the closing comment from Brandon Moss: "No matter where you are, it's never too late or too difficult to right the ship."

Many people didn't start saving and investing in their 20's or 30's. They started in their 40's, 50's, 60's and even older than that. And they still managed to build very respectable financial portfolios. They developed a personal goal that mattered very much to them. Then, they focused on making their goal a reality by saving and investing. If they could do it --- you can, too.

But, you do have to make a decision to get started. It doesn't have to be complicated, either. Read and learn about total stock market index funds. This type of fund is well-suited to a beginning investor. (It was one of my first choices and still is a core holding in my portfolio.)

Then consider saving up enough to open this type of investment account with one of the best fund companies. (Vanguard has the lowest expenses.) Even if you have a 401K, it still makes sense to have other additional investments. The taxes on this type of index fund are low, and it pays quarterly dividends, too. Once you start seeing those dividend checks showing up four times a year, you will be motivated to save even more.

Try looking at the concept of saving vs. spending in a different way. You are still "spending money" by investing. You are just spending your $$ in a different way. You're working on building a more secure financial future, instead of spending money on a lot of impulse stuff that is worth almost nothing as soon as you buy it.

February 04 2014 at 5:37 PM Report abuse -2 rate up rate down Reply
1 reply to Valerie's comment

So you are saying rely on Wall St. for money management? Where have you been for the last seven yers, or better yet, the last one hundred? Wall St. is a criminal enterprise.

February 04 2014 at 7:28 PM Report abuse rate up rate down Reply

Here we go again. Another corporate news story about planning for retirement. The only retirement most Americans will see is when they 'buy the box' if they can afford it.

This story infantalizes readers for it starts out with the myth of the piggy bank and penny saving. How deprecating.

Retirement stats say that msot Americans will not retire until 72, and these are liberal. Even if you believed it it would mean that this increase is from 62 in the 70's to 73 now.

No, debt will make it impossible to retire, unless you are in the one percent and then you are already retired for you do not work.

Capitalism can barely provide work for people and with machines steadily replacing labor and with insourcing and outsourcing the only retirement you will see is that which you earn -- through struggling for more equality and the end of one class rule by the rich.

February 04 2014 at 4:23 PM Report abuse rate up rate down Reply

Knowing is Half the Battle

To me the biggest takeaway is automating your finances as much as possible. Let's face it we have so much going on in our lives- micro- managing our money is not a reality unless you live in a bubble. Use technology to the up most to review your finances, create the automatic budget and set triggers when you exceed the limits. Simply put you can't spend more then what you make- that's called debt and it's a dirty word.

Our company BP Analytics ( creates customized financial software programs. I'm not doing a sales pitch here, but it's just amazing to me how many people (including myself) simply don't have time to manage our cash flow. Before making a purchase do we check if we can even afford it? Do we consider the offset of saving vs buying?

A well managed company has their pulse on their P&L at all times. They know what dollars are coming in the door and what dollars are going out. They know if they are profitable or losing money. Living in an "imaginary" world is not an option nor are they delusional.

My suggestion- try and use Personal Finance Management software available out there. Always know how much money you have and how much is "safe to spend". Isn't there a saying " knowing is half the battle". It really is true when it comes to finance.

February 04 2014 at 12:54 PM Report abuse rate up rate down Reply
2 replies to maurice.berdugo's comment

Managing cash sis great if you can earn it. American provides little but low paying jobs, precarisous works if any, and thus managing your money means choosing between medicine and food for many if not most.

Besides, your money is already managed by the one percent who own the banks and all industry and corporations. They just give you a smalls allowance while you give them tax subsidies and then you get to feel like you manage your money, when you don't.

Capitalism is a system that socializes costs and privatizes profits and until this changes you will have less money to manage day by day.

February 04 2014 at 4:28 PM Report abuse rate up rate down Reply

@ maurice --- you wrote that you "don't have time" to manage your own personal cash. Your priority is knowing how much is safe to spend (without having your house of cards collapse on your head).. Barely a mention of saving or investing for the future. You aren't driving your money. It is driving you.

Yet, with your haphazard approach to money and your fascination with technology, you still feel you are qualified to give financial advice to everyone else. (By the way, your shameless sales pitch to sell your company's financial software was not appreciated.)

Even Dave Ramsey (with his simple envelope budget system) does a better job of explaining cash flow than you do.

Have you ever quit dreaming about the wonders of technology and sat down with a pen and a piece of paper and written out a personal net worth statement?? (Everyone should do this a few times a year to know their financial standing and what progress (if any) is being made.)

Have you ever tracked your own personal spending for a month, by writing down EVERY purchase and assigning it to a category. (If you had, you would be amazed at how much money is being blown on impulse purchases.)

Apparently, you have no goals and no financial plan, either. You delude yourself by saying you "just don't have time for that". But, I'll bet you MAKE TIME to do things you really WANT to do --- like watching the Super Bowl on TV, perhaps.

February 04 2014 at 4:32 PM Report abuse rate up rate down Reply

Also on here is a story the alien life started the same time as the Big Bang.
To start with the "Big Bang" is a theory first suggested by Bell Laboratory engineers when they couldn't get the back ground noise out of their big antenna. The engineers claimed the back ground noise is the result of a huge explosion marking the birth of the universe that occured from a single point.
Actually, the universe simply produces back ground noise from stars and radiation.
Light from distant stars and galaxies simply loses energy and slows down. For example, light from a galaxy 6 billion light years away is 6 billion years old. Things tend to lose energy with time especially after billions of years.
Truth is we don't know how old the universe is or when it started, only that it started and we are here.
As for aliens, my experience with them was not pleasant. Why don't they send radio messages ? Why don't you send messages to a Caribu herd ?

February 04 2014 at 9:37 AM Report abuse -1 rate up rate down Reply
2 replies to alfredschrader's comment

The universe is infinite

February 04 2014 at 12:24 PM Report abuse -1 rate up rate down Reply
1 reply to SPQR's comment

I met some aliens then I found out they were just women from Norway

February 04 2014 at 12:29 PM Report abuse rate up rate down

The Big Bang Theory existed before the Bell Laboratory engineers found the background noise you speak of here. Their work only served to confirm the Big Bang Theory.

February 04 2014 at 3:44 PM Report abuse rate up rate down Reply

Save more than you spend.

February 04 2014 at 8:07 AM Report abuse +3 rate up rate down Reply
1 reply to jdykbpl45's comment

Easy to say but with the system geared for debt, we have negative savings in America. Most people are one step from homelessness so the Ben Frankling advice is easy to give but nearly impossible for most Americans to achieve.

February 04 2014 at 4:26 PM Report abuse +1 rate up rate down Reply