No matter where you are in life, finances can be a big pain in the you-know-what. It doesn't get easier, no matter how much older you get. So to help, we've devised a little roadmap of goals that everyone can follow to make sure they are meeting the right financial goals for their age. Of course, you can accomplish any of these goals sooner, but this is a good general map of where you should be at any given age:
Build Your Credit: You may have a credit card from college, but now is the time to start making sure you are actively building your credit history. Your credit history will help determine your credit score, which in turn will determine your credit worthiness when applying for rental apartments, car loans, mortgages, etc. The higher your credit score, the better your chances of being accepted and even getting a low interest rate on your loans or credit cards. Your student loans will help with your credit history, but it is a good idea to sign up for a credit card or two to help build that history. Remember to apply for a card that matches your credit score, otherwise you may be turned down, which can hurt your credit. Here is a good list of the best credit cards for your credit score.
Save Money Every Month: You'll want to begin building your emergency fund. At a bare minimum, you'll want a couple thousand in your fund to cover car repairs, unexpected doctor's bills or other financial emergencies. Establishing an emergency fund now can help you avoid amassing major credit card debt in an emergency. Save at least 10 percent of every paycheck to build your emergency fund.
Begin Repaying Your Student Loans: Most 20-somethings leave college with thousands of dollars in student loan debt. Once you have a steady income, your first priority should be to get your student loans under control. Talk to a loan counselor about your options, and get a repayment plan in place; then stick to it. If you'd rather work off your student debt, join Peace Corps or AmeriCorps, or work in an under-served area as a teacher or doctor in order to get your loans forgiven.
Become Financially Independent: Many 20-year-olds still rely on their parents' help with financial issues. Work towards complete financial independence as soon as possible. That will free up your parents' money for other things they need and want in retirement, give you a sense of pride in how you live your life, and ensure you're free to live the way you want to.
Allocate Income to Marriage and Children: Not all people get married in their 30s, but if you are contemplating this life change, you'll need to adjust your budget. Open a savings account to save for your dream wedding. You should also have sufficient emergency funds, a steady source of income and a budget that allocates most of your funds to things your house and children need before trying to get pregnant.
Pay Off All Non-mortgage Debt: By your 40th birthday, you should have gotten rid of all your student loan debt, credit card debt, car notes and any other debt besides your mortgage. Focusing on debt repayment now frees up your income so that you can use it more effectively as you get older.
Save Six Months' Worth of Income: Put enough money in your emergency fund to cover six months' worth of income so that if you or your spouse loses a job, has a serious medical problem or becomes disabled, you can still pay the bills. Base your savings goal on your current income and expenses.
Put at Least 15 Percent of Each Paycheck into Retirement Savings: Now is the time to start building up your retirement savings, so you will have enough money when you reach retirement age. Fifteen percent of each check should go toward retirement to let you retire and live comfortably in 20-30 years. You can either save through your company's 401k or open your own IRA retirement account. You should start this at the beginning of your 30s; the longer you wait, the longer it will take to save enough money for retirement.
Get Term Life Insurance: As you enter your 40s, it's time to start thinking about how you would provide for your family should something unexpected happen to you. Term life insurance ensures that your funeral costs will be covered, and your spouse and kids will have access to your assets should you die prematurely.
Invest With an Eye Toward the Future: Your retirement portfolio at this point should include investments that are expected to last you past the age of 90. Create a balanced retirement portfolio to give yourself a comfortable life in your golden years and leaves enough to pass on significant assets to your heirs.
Get Credit Card Debt Under Control: If you have kept revolving accounts open for their credit benefits, make sure you are paying off the balances in full every month in order to free up income and keep your credit score high.
Max Out Retirement Contributions: Contribute the maximum allowable amount to your Roth IRA and your 401k. If you have a traditional IRA, roll it over into a Roth IRA. And know your retirement number so you know how much you will need to retire. Here's how to calculate it.
Rebalance Your Retirement Portfolio: Go over your retirement portfolio with your financial planner. Make sure that your investments carry minimal risk as you move closer to retirement.
Pay Off Your Mortgage: If you still owe any money on your house, now is the time to pay it off, so you can enjoy your home during your retirement. Paying off your mortgage now ensures that you won't have to delay retirement in order to afford mortgage payments.
Reach Your Retirement Savings Goals: Before you can retire, you need to make sure you have enough money in retirement savings to support yourself and your family. Create a retirement budget and determine when you can retire. Stick to your savings plan and retirement budget so you can retire when you want to.
Sell Unneeded Assets: Sell vacation homes and other assets you no longer want or need; this can help you reach your retirement savings goals sooner.
Plan Your Estate: You should already have a will, but if you don't, get one drawn up as soon as possible. You may also want to put some of your assets in trusts or other estate planning tools to ensure your heirs can get them in a timely manner.