Friday, March 9, 2012

Women's Money Week: Money by Age

So the official title for today is "Money in Your Twenties/Thirties/Forties/Fifties/Retirement". Since I've only lived through two of those decades, I really only feel qualified to discuss those - but I'll toss out some predictions as well!

Money in Your Twenties
First "real" job. Student loan debt. Buying a house. Planning a wedding. Having a baby. These are just some of the financial events that can happen in this decade. I experienced a few of them - I graduated from college, moved across the country, started my first job, switched careers, got a masters degree, started paying back student loans, and got married, all of which required money I felt like I really didn't have. Here are some Must Do's for your twenties:
  • Start an emergency fund. I know, it seems like you've got no money to save - do it anyway. Get creative to earn the money from a side hustle, but get to the point that you don't have to rely on your parents for an emergency.
  • Start a retirement account. If your company offers any kind of matching, you are foregoing a raise by not taking advantage of this! Even if not, it's simply not financially possible to later make up the ground you are losing if you don't save for retirement in your twenties. Ideally, contribute to a 401(k) up to the match and max out a Roth each year starting as soon as you can.
  • Do something really stupid with money. (The stakes are lower!) I used my emergency fund to go to Europe with no job or plan lined up when I got back. It was totally worth it, and I wouldn't be able to bring myself to do it now. It worked out fine and I think made me more responsible with money later down the line - it was scary to see a $0 balance for a while!
  • Find a job you like, even if it's not what your degree is for. 
  • Track your spending and/or learn to live within a budget - this is likely pretty easy because you've only got so much and you know how to stretch it. But learn how to do that on purpose, not just because you have to. 
  • Get renter's insurance.
Money in Your Thirties
Any of the above milestones you missed in your twenties you are probably starting to loom in your life now - and sometimes they're more expensive than they would have been had they happened earlier. Luckily, you might be in a more stable place financially - you might be earning more than an entry level wage and you've started to figure out your personal spending habits, meaning you're probably not wasting as much money on crap (hopefully). Here are some things to do this decade:
  • Get life insurance, if you have anyone who depends on your income. 
  • Beef up your savings. It's not just for emergencies - it's for things that you now realize will cost money eventually, like replacing a car or a furnace or a roof. These things shouldn't be a surprise. 
  • Continue your retirement savings.
  • Re-evaluate your career decisions and make any changes you need to really appreciate your life. 
  • Spend  some money on yourself. If you've gotten in the habit of scrimping and saving all the time, it's important to realize that money exists to be spent and you can actually spend some of it on yourself without ruining your financial plans. Get a set of matching dishes or a towels that aren't ratty or put in a garden or whatever it is that will make you feel like you are a grown-up already. (This is not permission to buy a new car. My advice extends to anything that will not depreciate in value the moment you drive it off the lot.)
  • Give some money to others. 
  • Get serious about taking care of your physical self. 
Money in Your Forties
I suspect my forties will be quite a bit like my thirties, with more zeros attached. Extra things I'll probably think about doing then include:
  • Renovating our house. Ideally, we'll still be living in this house and it might be starting to feel cramped or old. A renovation is cheaper than moving, and would probably satisfy that itch just fine. 
  • Going on a nice vacation. 
  • Another career evaluation - are we happy with what we're doing?
Money in Your Fifties
It's hard to picture twenty years down the road - twenty years ago, I couldn't even babysit. From what I've seen of my parents' financial lives, I would say that I'd hope to take a hard, close look at my retirement savings and start making it a lot more conservative and fraud-proof. Hopefully a Bernie Madoff won't affect my golden years.

I can't even imagine what this will look like. Will my generation retire in our fifties or sixties?  It seems unlikely. Do I want to have a traditional retirement anyway? As a woman who grew up expecting to work and enjoying my career, it seems weird that someday I'll just decide to...stop working and stay home and garden for potentially another twenty years. What might I want to do with the second phase of my life? How can I fund it?

That brings us back to the issue of money in your twenties or thirties or wherever you happen to be - making the choices for your future self as wide open as possible is really what financial responsibility is all about.

What financial advice would you give to anyone in these age ranges?


  1. Based on what I've seen with my and my husband's parents and grandparents, I think it's an extremely good idea to make sure that your entire house is up to date/renovated before retiring. Also make sure you have a new car before you retire so that you aren't making major financial decisions when you're 70+. From what I've seen, things can go downhill very quickly.

    My grandfather recently bought a new car---he paid over $30,000 for a hyundai sonata. My husband's grandparents need a new roof and MAJOR repairs to other parts of their house. Since they don't 'see' things like we do, their $400,000 house may need to be bulldozed once they have passed. None of them are to the point where they could be declared incompetent, but they certainly are not making good decisions.

    1. Wow, Stephanie, thanks for sharing. Those are issues I would not have thought of at all - but I've noticed similar problems when we were house shopping or going to estate sales. Older folks on fixed incomes have a much tougher time handing renovations or major changes, and frequently they don't notice that things need to be fixed or replaced. This is a great recommendation for people to keep in mind before they retire.

  2. I'm in my early 20s and it's great because I have a kickstart on all of the things you suggested. Granted, I just opened my retirement account this year but it is opened! Ha.

  3. I entered my twenties not long ago so mostly I am just absorbing as much advice as possible. For the earlier ages, my advice will always be, set aside something for retirement.


Thanks for commenting!