They say wisdom comes with age—but it’s never too early (or late!) to start making smart money moves.
How do we know?
Well, after culling some of the most popular goals that our premium LearnVest users are working toward, we found that the more things change, the more things stay the same. Our findings revealed that these folks place saving for retirement and building up a healthy emergency fund as among their top goals, no matter how old they are.
But money goals can also reflect your life stage: We found that younger savers in their 20s and 30s are concentrating on big-picture to-dos that will help set them up for their futures, while people in their 40s and 50s are trying to get rid of that last bit of debt before they tap into their nest eggs.
Curious to see where you stack up in the financial goals department?
Check out our guide to the financial goals you should consider focusing on each decade, including nuggets of advice from a CFP® for how to work on achieving them.
3 Financial Goals for Twentysomethings
1. Emergency Savings
Perhaps because they’ve seen firsthand what a recession looks like, our research found that building up an emergency fund is the biggest goal that people in their 20s had for themselves.
The general rule of thumb is to work as much as possible toward saving six months’ worth of take-home pay, says David Blaylock, CFP® with LearnVest Planning Services. Of course this can seem daunting to recent college grads who are just starting to chip away at student loan debt. But the reality is that this decade can be a good time to gain traction on emergency savings because bigger costs, like a mortgage or child care, typically haven't kicked in yet.
“You have less income, but you don’t have as much responsibility,” says Shelly-Ann Eweka, a CFP® with TIAA-CREF. “The key is to start.” And you can do this by reviewing your budget and pinpointing what percentage of your pay you can earmark for emergency savings—and then sock away that amount until you reach your six-month goal.
And remember that emergency savings is just one of the three things that we believe make up your financial security—the other two include retirement and paying down credit card debt. So consider devoting about 20% of your take-home pay toward all three goals combined, if it works within your budget.
2. Saving for Retirement
If you've started setting money aside for retirement in your 20s, you're already making progress. If you haven’t, the good news is that you’ve got time on your side—and a lot of it, at that—to take advantage of compound growth.
As a general rule of thumb, aim to save at least 5% of your gross income, if possible, with the eventual goal of increasing it to 15 to 20%. And if your employer offers a 401(k) match, says Eweka, try to contribute enough to maximize the match. Think of it this way: That match amount is essentially bonus money to fund your future retirement.
3. Saving for a Home
Young folks today are such overachievers: Retirement and a down payment on a home were tied for the No. 2 most-saved-for goals among LearnVest users, which is great—as long as you’re building up that aforementioned financial security first.
“In your 20s, you may have the appetite for owning a house, but there’s a lot of uncertainty,” Blaylock says. “What if the dream job of a lifetime comes up in D.C. and you just bought a home in Boston?” What is pretty certain, however, is that you will eventually retire, so you should make sure you're putting enough toward your nest egg before you start stashing away for a down payment.
That said, if you are making progress on retirement and want to save for a home in your 20s, your timeline is key to the type of saving strategy you might take. So, for example, if you know you won’t be ready for a starter (or forever) home for at least five years, consider investing some money into a brokerage account so that your down payment savings can potentially grow even further.
"$1 saved in your 20s may be worth $16 during retirement, whereas that same dollar saved in your 30s may only be worth $9."
3 Financial Goals for Thirtysomethings
1. Emergency Savings
By the time you’ve hit the big 3-0, you’ve seen firsthand how life can throw unexpected curveballs—you may have already dealt with your first big car repair or emergency root canal.
“You probably have more responsibilities and less flexibility with your money than you had in your 20s, so your emergency fund is more important than it used to be,” Eweka says. “Plus, you might have someone else depending on your income.”
If you’re in your 30s and haven’t put a penny toward emergency savings, that should be goal No. 1, says Blaylock, starting with at least one month's worth of take-home pay, and then you can steadily work your way to a fund of six months' worth.
If you need to find places in your budget to direct toward emergency savings, try to isolate areas of your budget where you may be able to lower or eliminate expenses—say, getting rid of premium cable or downgrading your cell phone plan—so you can redirect those savings toward your emergency fund.
2. Saving for Retirement
The next-in-line goal for thirtysomethings that we surveyed was building up their nest egg. This can be all the more important during this decade if you didn’t start saving in your 20s because you've missed out on some compound growth.
“Think of it this way: $1 saved in your 20s may be worth $16 during retirement, whereas that same dollar saved in your 30s may only be worth $9 during retirement,” assuming a 7% rate of return, says Blaylock. So if you’re just getting around to saving in your 30s, consider allocating at least 10% of your gross income toward retirement.
And if you’ve started saving but are looking for ways to boost your contributions, consider increasing your IRA or 401(k) contributions by the same percentage as your salary hike the next time you get a raise. If you're able to stretch yourself, you can also set calendar reminders to raise your contributions by 1% every six months.
3. Saving for a Home
By this decade, you may be married or living with a partner, and may even have a couple of kids in tow. You’re also likely to be more stable in your career, so it makes sense that saving up for a home would be a top goal in your 30s.
"At this point, I think you can start balancing your need for a new home with saving for retirement” and other financial security goals, says Blaylock.
But he offers a word of caution for those who are considering the first-time homeowner benefit, where you put as little as 3% down in exchange for a higher mortgage payment.
“A far better option is to make as significant a down payment as possible, with the ideal number being 20%,” Blaylock says. “With this strategy, you'll not only have a lower mortgage payment but you may be able to avoid costly mortgage insurance.”
3 Financial Goals for Fortysomethings
1. Saving for Retirement
At this point, you’re just entering the Sandwich Generation years, which means you’re likely juggling your kids’ needs, your parents’ needs and your needs all at the same time. Still, it’s imperative to try to pay yourself first—which is why it’s a good thing that retirement tops this decade's list.
“You can see retirement in the nearer future [in your 40s], and hopefully you’ve started maxing out your retirement contributions already,” Eweka says. “If you haven’t, you need to be more aggressive with retirement savings.”
If you’re only starting to save in your 40s, then consider putting at least 20% of your gross income toward your nest egg. And make sure you’re taking full advantage of any company match, so you’re not leaving any money on the table.
In your 40s you're probably at the height of your earning power, but don’t think that you can let up on that six-month emergency-savings goal.
If you need to play catch-up, you might also consider looking into opening more than one type of retirement account, such as a Roth or Traditional IRA in addition to your company's 401(k).
And remember that, as much as you’d like your kids to have a hefty college account waiting for them on graduation day, don’t save for them at the expense of your retirement. Bottom line: You can always borrow for your child’s education, but you can’t borrow for your golden years.
2. Saving for Emergencies
In your 40s you're probably at the height of your earning power, but don’t think that you can let up on that six-month emergency savings goal. After all, the larger your family, the more likely you are to have an unexpected expense pop up—like the day your 10-year-old son broke his leg snowboarding.
One thing that could potentially help pad that emergency fund? Bonuses or other windfalls, like tax refunds. “Take advantage of those lump sums to fund your emergency savings goal,” Eweka says.
Our 90/10 rule provides a good guideline to consider: Put 90% toward such financial priority goals as retirement, paying down credit cards or emergency savings. And use the remaining 10% for something fun—like a safer family vacation this time.
3. Paying Down Credit Card Debt
Apparently with age comes credit card debt, which isn’t surprising considering you’ve likely got more groceries, back-to-school items and weekend activities to pay for than you did in your 20s and 30s.
“I don’t find [credit card debt in your 40s] uncommon at all,” Blaylock says. “People might get through their 20s and 30s without credit card debt, but then they can get back into debt” because of their added financial responsibilities.
Blaylock actually prefers that people exit their 30s with no credit card debt, if possible. But if you do have some, you should come up with a monthly payoff amount that can help you eliminate the debt in five years, so you can work on making progress on your other financial security goals.
One more suggestion? Prioritize your credit card debt by tackling the one with the highest interest rate first, while still paying the minimums on the others, says Eweka.
3 Financial Goals for Fiftysomethings
1. Saving for Retirement
In your 50s you're likely fully settled in your career, and your children are either in college or on their own. Most impressively, you probably have more workdays under your belt than on the horizon.
As such, “now is the time to really hammer in on retirement,” Blaylock says, adding that you should focus on ramping up retirement savings if you feel like you’re behind. The good news is you can take advantage of catch-up contributions for your 401(k) and IRA, which let you put in an extra $5,500 and $1,000, respectively, if you’re age 50 or older.
In your 50s you might consider building up your emergency savings with more than six months of take-home pay—maybe a year or two's worth.
If your retirement account doesn’t hold target-date funds, which rebalance automatically as you get closer to retirement age, then consider taking a look at your investments to figure out if you’re comfortable with the risk level in your portfolio.
You’ll likely want to dial down the risk, Blaylock says, although it’s a good idea to work with a financial adviser to help you figure out what adjustments should be made to help you reach your retirement goals.
2. Emergency Savings
Hindsight is twenty-twenty, and fiftysomethings have probably seen it all—which is why they may still see the value in keeping their emergency savings fully funded.
“Even when you’re 50, the six-month rule applies," Blaylock says. "You still want to work toward that goal.”
In fact, you might even consider building up your savings with more than six months of take-home pay—maybe even a year or two's worth—as long as you’re already fully funding your retirement goals. This way you may not have to dip into your retirement funds early if a major financial emergency strikes.
3. Paying Down Credit Card Debt
When you're encumbered by credit card debt in your 20s, you probably have years to amend those youthful financial transgressions. But it's another story when you’re nearing retirement.
Ideally, you want to be as close to debt-free as possible when you’re approaching life after work because you don’t want your retirement plans waylaid by credit card balances.
So consider taking a look at both your fixed and flexible expenses each month and determine where you can cut back—perhaps what you save by cutting back on an expensive gym membership can be put toward debt repayment.
And, most important, try not to take on new debt. So that means no more borrowing to pay for your child’s college tuition, or cosigning any other types of loans for your adult children. “You don’t want to get into retirement with all this debt,” Eweka says. “You’re [putting yourself at] risk of running out of assets if you’re no longer working.”
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.