Money Saving Habits to Develop in your 20s, 30s, 40s and Beyond

Business.com / Finances / Last Modified: February 22, 2017

Are you ready to start saving money for your future? Check out these saving habits for all ages that will help you build wealth.

Money is going to be one of the few constants that defines every period of your life.

Every decade will bring its own money challenges, regardless of the life you decide to live. This guide is going to take you through the various decades of your life to help you plan for the future.

For the purposes of this article, you are just out of college and you’re ready to take on the world.

You have your first job and a mountain of debt. So what are you going to do about it?

Tips for Your Twenties

John Williams from Platinum Lending deals with people with huge loans and who are struggling to deal with finance on a daily basis. Many of them are young and many of them have poor credit records. So what can they do about it?

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Williams believes that, “Credit card debt should be a priority. Most students possess it and your 20s is never a better time to start building up your credit record. It’s something most people leave until their 30s and have a family, which is when they need to get the best rates.”

Start paying down that debt and make sure that you are borrowing no more than 30 percent of your overall credit card limit, unless you absolutely have to. Remember, seven out of 10 Americans mess up their credit score before they’re 30.

Alongside paying down your debt, start building up an emergency fund. As someone who is single and without a family, it’s unlikely that you will have use for a fund at this point, which is why now is the perfect time to start building it. Set up a direct deposit from your pay check so you’re not tempted to spend. That way your savings will go into a separate savings account before you can touch it.

Finally, the value of compounding comes in handy for saving for retirement. Your 401(k) may be the last thing on your mind at this age, but the value of compound interest means that if you start saving now you could be thousands of dollars better off later.

Dealing With the Realities of the Real World in Your Thirties

You’re now in your 30s and you may have an established career path. Many people also discover that kids are entering the picture and they now have to start thinking about their families and dependents. It may also be the case that their parents are aging and they have even more responsibility than ever before.

To begin with, continue to hack away at debt. Ideally, your credit card debt from your student days will be gone, but those loans will still be there. Try to pay off as much as you can as fast as you can, as long as you are not incurring any penalties for doing so.

You should also start saving for your future children, assuming they are not already here. The costs of childcare can be enormous, with the latest estimates revealing that it could cost $245,000 per child, so you have to consider where those thousands of dollars are going to come from. You may even want to start a college fund for your future children. The costs of higher education will only increase, so it makes sense to start now.

Big life events are also likely to be a factor. You have far less room for error if you lose your job, the economy crashes, or interest rates rise causing your mortgage payments to spiral out of control. The best form of protection you have other than an emergency fund is insurance.

Consider expanding your coverage and think about whether what you have now is truly enough.

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Entering the Prime Spending Years in Your Forties

Your 40s are characterized by spiraling costs. You may very well have multiple children and they are steadily growing up, thus leading to even higher costs. At this stage, you may have taken your first step on the housing ladder. Assuming nothing has gone incredibly wrong, these will be the years where you will be spending the most just trying to keep your family unit afloat.

So what should you do?

Make retirement your priority. Stop funding the college pot and go with what you have. Your kids can pay down student debt, but you have no other option but to save for retirement. If you haven’t already started building a considerable pot by the end of your 40s, you are going to find yourself in some serious trouble.

Focus on your investments and consider how you are going to make a passive income. This is where you can consider some riskier investments, as long as you don’t go nuts with it. As you get older, your investments will become more conservative, so now is the time.

The Biggest Earning Years and the Slowdown Beyond

When you enter your 50s, this is where you will reach the pinnacle of your career. The kids may be in college and your costs are going to be going down, whereas your income is going up. Yes, you can splurge on some luxuries at this age, but you also need to keep in mind that after you retire your income is going to collapse and you will have to rely on what you’ve saved.

Gradually decrease the riskiness of your investments and make paying off the mortgage a priority. Fill up your retirement fund as best as you can and maximize your contributions to any employer-sponsored plan.

Once retirement kicks in, everything has to be about you. First of all, you should be educating yourself on your current level of coverage. Be aware of what your current health insurance plan covers and where the gaps are. Make a careful budget for how much you are spending every month and how much you have coming in.

It will be a pleasant surprise to see how much your outgoings have increased, but temper this surprise with the realization that your income has also gone down.

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Conclusion: What Can Happen?

As someone who may be twenty or thirty years away from retirement, it can be difficult to take all of this in. But those who enjoy better lives after retirement are always those who prepared well in advance. You may want to party and you may want to blow all your cash at an early age, but it’s better to be conservative and to put as much money aside as you possibly can.

There are an increasing number of people finding that they have to work part-time jobs during their retirement just to survive. They have to compromise their enjoyment because they didn’t prepare and they didn’t take the idea of retirement seriously.

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