Financial decisions play an important role in our lives...from shaping our future, to determining our financial security, helping us master our wealth, and allowing us to live a good life. Because women face unique financial challenges throughout our lives (the gender pay gap, taking time off work for caregiving, and having a longer life expectancy), getting these financial decisions correct is particularly important at all stages of our lives.
Each decade in life provides opportunities to establish good financial habits. So, take advantage of them to set yourself up for success and mitigate potential risks.
Your 20s: Building a Solid Foundation
In your 20s, you can start (or continue) laying the groundwork for your financial future. This is the time to start or maintain good financial habits and make decisions that will benefit you well into the future.
- Budgeting and Saving: Create a budget to manage your expenses and start saving for emergencies and future goals. A typical emergency fund ranges from 3-6 months of expenses. Aim to save at least 20% of your income between your emergency fund and investments. Even if you can only invest a small amount each month, it will add up over time!
- Education: Investing in yourself through education and career development can increase your earning potential. Learn how to negotiate for yourself and know your worth.
- Debt Management: If you have student loans or credit card debt, develop a plan to pay them off. Strategically, paying off the high-interest debt first may have the greatest benefit.
- Insurance: Health and renter’s/homeowner’s insurance are critically important to mitigate potential risks. If you have dependents and/or significant debt, life insurance should also be a consideration.
Your 30s: Adding to the Foundation, Building Wealth, and Planning for the Future
Your 30s may bring more financial responsibilities (marriage, homeownership, or children). So, building on the solid foundation from your 20s is crucial.
- Emergency Fund: Evaluate your emergency fund and ensure it is sufficient to handle an enhanced lifestyle or additional obligations.
- Investing: Start (or continue) investing for the longer term. Retirement accounts like 401(k)s and IRAs are options that may align with your goals and risk tolerance. Other investment opportunities include using a 529 plan to save for children’s education.
- Insurance: Review existing policies and make adjustments. Adding disability insurance or an umbrella policy may be appropriate.
- Estate Planning: Confirm and review your beneficiaries on all accounts. Create a will and health care directive. Consider powers of attorney and guardianship if you have children.
Your 40s: Navigating Mid-Life Financial Decisions
In your 40s, there may be changes to your family, your career, or your financial priorities. It is critical to review your goals to make sure you are on track and make any necessary adjustments.
- Debt Reduction: Focus on paying down mortgage debt and any remaining high-interest loans. Be mindful of lifestyle inflation or spending more just because you earn more. Review your budget and spending.
- Retirement Planning: Reassess your retirement goal/plan and contributions. Aim to increase your retirement savings as your income grows or annually.
- College Savings: If you haven’t started saving for your children’s education, consider opening a 529 savings account. Be mindful of prioritizing your children’s expenses over retirement savings.
- Healthcare Planning: Review health insurance coverage and begin thinking about long-term care insurance.
Your 50s: Preparing for Retirement or Being Retired
As you navigate your approach to retirement, it is imperative to review your financial plan and make decisions to prepare for life after work.
- Retirement Savings: Review savings patterns and continue to increase savings. Revisit investment strategies and risk.
- Healthcare Costs: Plan for rising healthcare costs in retirement including Medicare premiums and supplemental insurance.
- Retirement Timing: Decide when you want to retire and determine your probability of success to live your good life while meeting your needs, wants, and wishes.
- Estate Planning: Review and update your estate plan, including wills, trusts, and beneficiary designations.
Your 60s: Retirement or Living in Retirement
In your 60s, whether you are in retirement or quickly approaching it, there are still opportunities to review and update your financial plan.
- Social Security: Understand your Social Security benefits and review your Social Security timing options.
- Financial Planning: Continue to review your financial plan at least annually.
- Estate Planning: Review your documents as your family and life changes.
- ENJOY IT!
Your 70s, 80s, 90s and beyond: The “Seasoned Decades”
Living in retirement doesn’t mean you should stop investing or at least reviewing your investments.
- Retirement Accounts: Consider consolidating retirement accounts for ease if it is right for your financial situation. Review risk tolerance and asset allocation.
- Invest For What’s Next: All retirement assets are not going to be used on Day #1 of retirement. Retirement means different things to everyone, so if what’s next is a dream vacation home, a cruise around the world, or continuing to build wealth, continue to invest for it!
- Plan for Long Term Care: Regardless if there is long term care insurance in your portfolio or not, it’s paramount to explain explaining your thoughts and wishes to family and/or caregivers sooner rather than later.
- Plan Your Legacy: Review existing estate documents as life changes. Consider gifting strategies to family or charitable organizations.
Throughout life, women AND men face a variety of financial decisions, challenges, and opportunities. Breaking down these decisions into manageable chunks allows you stay informed, proactive, and nimble. Although it may seem daunting, a solid foundation can lead to greater financial security and peace of mind, despite what may be happening in the market or in the headlines. Having a guide to educate you and look out for financial blind spots may help you Master Your Wealth.
McKinley Carter Wealth Services has many Financial Strategists to guide you, walk alongside you, and develop a plan while you navigate decades of financial decisions.