How to Improve Your Financial Outlook at Any Stage in Life

Your career, your income, and your priorities will change over the course of your life. Your financial outlook should be changing, too. Whether you are in your 20s or your 60s, it does not pay to be a passive player in your financial future. At every stage of your life, there are important, strategic steps you can take to improve your financial outlook and set yourself up to reach your financial goals.

Financial Goals for Your 20s

Create a Budget and Track Spending

Before you receive your first paycheck, you should create a budget that outlines your monthly and daily expenses. Prioritize paying bills, then paying off debt, then paying yourself. Tracking your spending using a spreadsheet or a budgeting tool is a great way to learn about your own spending habits. Use that knowledge to build a budget that pays the bills and also works toward the lifestyle you want.

Save for Retirement

Retirement might be the last thing on your mind right now. Your 20s are actually the best time to start a retirement fund. You might save for retirement through your employer’s 401(k) retirement plan or by opening your own retirement fund. Be sure to contribute to your retirement fund on a regular basis. Saving for retirement only gets harder the longer you wait to start. Your future self will thank you.

Pay Down Debt

Your debt might take the form of a credit card, financing for a new car, or student loans. Get ahead of the curve by creating a plan for paying down your debt. Prioritize paying the loans with the highest interest rates since those loans will end up costing you the most in the long run.

Build an Emergency Fund

Emergency funds are not just for older people or people with families. Every person should be setting aside money for life’s unpredictable moments. An accident or injury could leave you with costly medical bills or car repairs. You might even be unable to work for a short time. A financial safety net will alleviate the stress of those unplanned situations. Your savings should be enough to replace your income for at least six months.

Financial Goals for Your 30s

Consider an IRA

Consider opening an IRA (individual retirement account) in addition to the 401(k) account your employer provides. Investing in a Roth IRA in your 30s is a great way to maximize the size of your retirement fund. The money that goes into an IRA is already taxed, but any earnings and withdrawals are tax free before a certain age.

Be Aggressive in Paying Down Debt

While you probably accrued a lot of debt in your 20s, your 30s is the time to get serious about paying it off. If your budget allows it, you should increase your monthly payments toward any outstanding loans. Focus on paying off the smallest debts first. Avoid taking on more debt by any means possible, even if it means lifestyle adjustments.

Consider a 529 Plan for Children

If you have children or plan on having children, you might want to take advantage of a 529 plan. A 529 account is a tax-free fund that you can contribute to for the purpose of covering your children’s education expenses in the future. Even when children are still young, parents can start taking advantage of the tax deductions on their contributions.

Avoid Lifestyle Overspending

You are likely earning more money than you were in your 20s. That is great news for financial goals like building an emergency fund or paying off debt. However, higher income usually comes with the risk of lifestyle overspending. It is tempting to enjoy and spend your extra income, but it can interfere with your goals. To avoid overspending, consider allocating some of your extra money toward your debt, savings, or investment accounts.

Financial Goals for Your 40s

Increase Retirement Saving Each Year

Ideally, your retirement account contributions should be increasing along with your earnings. Some retirement accounts allow you to set up automatic contribution increases each year. This feature can save you the hassle of remembering to raise your contribution and readjust your budget. If your employer offers a matched contribution, you should be contributing the maximum amount that can be matched, at the least.

Make a Plan with a Financial Advisor

A financial advisor can help you evaluate your current financial situation and assess whether you are on track with your future planning. Anticipate the big expenses that will burden you in the near future, such as weddings, grandchildren, paying off big loans, etc. Start thinking about financial decisions you will need to make in the future that will affect you and your family.

Balance Your Portfolio

Just like your physical health needs a regular checkup, so does your financial portfolio. A good portfolio is a balanced portfolio and having diverse investments can lower your risk. A financial adviser can help you assess the strength of your portfolio. Consider your financial priorities when determining the amount of risk you can afford to take with your investment strategy.

Consider Insurance Coverage

You probably bought life insurance in your 30s and then forgot about it. Even now it might not be top of mind, but the older you get, the higher insurance premiums are. Now is a good time to start looking into additional insurance policies that aren’t covered by your benefits, such as long-term care or long-term disability insurance. Otherwise, the better part of your retirement fund could end up going toward covering medical care costs.

Financial Goals for Your 50s

Big Focus on Retirement Savings

If you aim to retire in your 60s, then now is the final chance to maximize your retirement savings. Contribute the maximum amount to your employee retirement account. Start increasing your payments toward any additional funds as well, like your IRA or Roth 401(k).

Prioritize Any Unpaid Debts

When you retire, you don’t want your hard earned retirement savings to be going toward paying off your lingering debt. Eliminate as much debt as you can now to ensure that your retirement funds are going back into your pocket, not debt collectors’. Downsizing on your debt is important. Pay off and close any credit cards that you don’t need.

Discuss Long-Term Care Options for the Future

It is best to have discussions about your long-term care options before you actually need them. You should have a family conversation about your wishes for your life care and what arrangements need to be made. Being familiar with the options available will lessen the burden on your family when the time comes.

Create an Updated Budget

At this point in your life, you may have less (or more) people depending on your income. Whichever is the case, your budget may be in need of an update. If your expenses have decreased, you can be more intentional about paying off debt and contributing to savings and retirement funds. To avoid accruing more debt, your new budget should allow you to live well within your means.

Financial Goals for Your 60s

Chat with Your Financial Advisor About Retirement

You may be ready to retire but that does not necessarily mean your finances are. Meet with your financial advisor to discuss your options. If you have achieved your retirement savings goal, make sure you understand the withdrawal limitations and tax requirements. If you did not reach your retirement goal or had to withdraw funds early, make a plan with your advisor to explore alternative options for supplementing your income.

Understand Your Social Security Benefit

You are entitled to receive your social security benefits as soon as you turn 62. However, your benefits could be reduced if you begin receiving them before you reach the retirement age. On the other hand, delaying your retirement benefits could make you eligible for increased benefits. Your spouse or children may be qualified to receive your benefits which could determine when you want to start receiving them.

Consider Working Longer or Part-Time

People in their 60s are continuing to work more now than ever before. There are many good reasons to continue working at your job or to pick up a part-time position. Having an extra source of income on top of your retirement and savings could afford you some more luxuries. You might keep your full-time job to continue taking advantage of the employee benefits. Many people delay retirement simply because they enjoy working and don’t want to change their lifestyle.

Keep an Eye on Your Emergency Fund

Even with your retirement savings and income replacements, unexpected expenses can arise. Hopefully, by now you have built up an emergency fund that could supplement at least six months of your income. The next step is making sure you are getting the highest rate you can. Consider moving your savings to a high-yield savings account to maximize the earnings on your nest egg.

Financial Goals for Your 70s

Simplify Your Finances

As you get older, it might be harder to keep track of your finances. You can make things simpler by consolidating your accounts. Take a look at every account in your name and write down what it is used for. If an account doesn’t serve a specific purpose, close it and allocate the funds into one place. It is always a smart idea to get help from someone you trust. This could be a family member or a financial planner who can handle your accounts in your best interest.

Meet with a Tax Planner

Over the years, you have accumulated wealth that you may want to pass on to your family or give to an organization you care about. To ensure you are not also handing over a large tax burden, it is a good idea to meet with a tax planner. Tax professionals will know how to minimize the burden and maximize the tax benefits that will be applied to your wealth.

Take Required Minimum Distributions from Tax-Deferred Retirement Accounts

The IRS requires you to start taking minimum distributions from certain retirement accounts starting at age 72. This generally applies to traditional IRAs and employer sponsored retirement plans, including 401(k)s. If the minimum amount is not withdrawn by the due date, the remaining amount is subject to be taxed.

Start Estate Planning

While it is never too early (or late) to start estate planning, your 70s are a crucial time to start thinking about how your property will be handled. If you don’t have an estate plan in place at the time of your death, the state will step in and divide up your assets. However, this might not be in line with your wishes and could place additional burden and stress on your loved ones.

While there are important steps to take at every stage of your life, you can always start earlier. Your financial outlook doesn’t have to be limited to the next 10 years. Thinking far ahead into the future can help you make smart decisions now that will have a big payoff later. Be sure to include your spouse or family in important discussions that will affect them.

Take advantage of the expertise of financial experts who can provide advice and insight on your financial future. Learn more about the steps you can take toward your financial goals at your current stage of life by visiting PlainsCapital.com.