Financial wellness is a common goal for most people, but knowing exactly when and where to invest discretionary income can be a tricky balancing act.
We all know we should put money toward student loan payments, retirement savings, college savings for kids, debt repayments, cafeteria plans (HSAs, FSAs, etc.), emergency savings, and savings for major purchases. When there are needs pulling you in so many directions, it’s hard to know which to prioritize. And to make matters more complicated, different phases of life call for different strategies for saving.
Fortunately, we’ve compiled a handy guide for financial wellness at all ages and stages of life so you can take the guesswork out of managing your finances.
Stage 1: The roaring 20s
Young adults just finishing college have different incomes — and demands on their money — than older adults.
In your 20s, put your focus here:
- Pay extra on student loans and debts racked up in college.
- Start — and contribute some of your income to — an emergency fund.
- Begin participating in your company’s 401(k), at least up to the percentage your company matches. They’re willing to give you extra money to put in there, and your return over the course of your adult life will be greater the earlier you start.
- Healthcare probably won’t be a major focus at this stage, but saving enough into your HSA to cover your deductible is a wise money move.
Stage 2: 30- and 40-somethings
With kids at home and more demands on our dollars, the 30s and 40s can certainly be tricky. Hopefully by this phase, your income has increased, and you can contribute more discretionary income to more buckets.
In your 30s and 40s, put your focus here:
- You’ll probably be spending more on healthcare — either for yourself or minor children — so expect to hit your annual deductible here and there and prepare for it by bulking up those cafeteria plans.
- Keep paying down debt as much as possible.
- Gradually keep increasing your deferral rates for your retirement plans.
- Contribute as much as possible to the kids’ college savings accounts.
Stage 3: The thrifty 50s
Arriving in your 50s, your needs shift to a more health-focused type of savings plan and readying for eventual retirement. While the golden years are off in the distance, they’re becoming more and more realistic and can be seen on the horizon.
In your 50s, put your focus here:
- Healthcare needs will increase during this stage of life, with more prescription usage and more frequent health screenings.
- Max out retirement and cafeteria plans, if possible, and take advantage of any catch-up contributions at age 55.
- Research long-term care insurance now.
Stage 4: 60s and pre-retirement
Once you hit 60, you’ll be readying yourself to retire for real. It’s good to really focus on the road ahead right up until your last day of work.
In your 60s, put your focus here:
- Max out all of your pre-tax savings opportunities: HSAs, 401(k)s, etc.
- Start researching Social Security and Medicare, while analyzing your retirement savings and future expenses.
- Review beneficiary designations.
- Make sure all investments are in the proper risk categories.
- Healthcare will be a big focus now with elective procedures more common in this age group.
Once you hit retirement age, money management starts to look a little different (although your cafeteria plans will still come in handy!). But no matter what age or stage you fall into, your friends at Omnify and UBT are here to help.
We hope you found some of our tips helpful! This article is part of the Financial Planning, part of UBT's Five Principles of Financial Wellness Series.
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