WASHINGTON Aug 28 Life spans are long, and not
everyone lives on a "house and kids by 30, first million by 50"
kind of schedule. Nevertheless, there are financial milestones
that it helps to hit at every stage.
Here is my list, by decade. If you are late on a few, that's
no big deal. If you're early, that's great.
0-10: Learn to add and subtract. Sell something (lemonade,
car-washing services) for money. Hope your parents are savvy
enough to pay you an allowance - it's an important first
money-management step. Save up some of it for something you
really want. Use some to buy a gift for somebody else.
10-20: Work at a job for money. Put some of your paycheck in
a checking account. Once you are working, establish a Roth
individual retirement account (IRA) - even if you have to ask
your parents to help you fund it. Buy your own clothes. Learn
about average salaries for different careers, and about how much
different things cost. Make important decisions about which
college to attend and what to study - not strictly on the basis
of cost, but with realistic finances in mind. Get a credit card
with a low borrowing limit and use it regularly, but pay it off
20-30: Learn to invest. Learn to budget. Continue to feed
your Roth IRA, and start a 401(k). Organize a repayment plan for
your student loans. Prioritize among all the things you want or
may need at this age - from couches to cribs to career suits.
Keep your credit report clean by not defaulting on debt or
paying bills late. Learn to make credit cards work for you by
choosing a good cash-rebate card, using it for everything and
paying it off monthly. Set up a rainy day savings fund so that
you build it automatically via payroll deductions. As soon as
you have children, buy life insurance. Do your own taxes at
least once. Learn to track all of your money in a program like
Quicken or Mint or on your own spreadsheet if you're so
30-40: Continue plowing as much as possible into retirement
vehicles. Buy a house. If you have children, set up 529
college-saving plans for them. If you haven't already, switch
your various insurance policies to high-deductible plans -
you'll save money every month on premiums and should have
accumulated enough savings by now to cover the deductibles.
Build your investing expertise by learning about exchange-traded
funds, individual stocks and bonds. Diversify your investments
to make sure you have some money in some of these categories:
real estate, commodities, foreign stocks. Boost your skills -
either by pursuing an advanced degree, or taking courses, or
spending money on the tools that will make you more employable.
Follow the performance of your investments in a
40-50: Create an investment account that is separate from
your rainy day savings, your retirement fund and your
college-savings vehicles. Put it on autopilot so money is
deposited routinely from your checking account. Max out your
retirement savings to the extent possible. Use some money for
something you've always wanted to do - take the big family trip
or get the swimming pool installed. Talk to some financial
advisers - you may find one that you want to work with, or you
may decide you can manage your investments by yourself. Talk to
your own aging parents to make sure you understand their
finances, what you would have to do if they needed care, and
what you will have to do when they die.
50-60: Do the preretirement math so you have a rough idea of
how much money you'll have when you retire and how much you have
to save between now and then. Pay off all your debts, except for
a low-interest fixed-rate mortgage. Consider buying a vacation
or retirement home. Educate yourself about Social Security,
Medicare and any pension benefits you might have coming to you.
Invest some money in your future self - building a hobby shop or
taking classes to prepare for your next act.
60-70: Start collecting Social Security. Develop a part-time
consulting gig or side business. Learn to cash in on senior
discounts. Earmark a portion of your savings ($250,000 or more
if you can afford it) to save in case you need long-term care.
(Investigate long-term care insurance but be cautious; many
companies are dropping out of the business or drastically
raising their rates.) Invest in 529 plans for grandchildren
whenever they come along. Rejigger your investments so they will
provide the income you need. Decide if you want to monitor them
yourself, or hire a professional money manager. Get more
strategic about your charitable giving - make fewer, larger
gifts, and consider setting up a donor-advised fund - a type of
private charitable fund that acts like a foundation and that
other family members could also contribute to. Splurge on the
retirement trip or big toy. Prepare yourself psychologically for
the withdraw-and-spend phase of life, after a lifetime of
working and saving. Start serious estate planning.
70-80: If your finances are tight, cut back on spending. If
you've got plenty of money, begin acting on your estate plan by
being more generous with relatives and charities. Talk to your
kids about your finances, and make sure you've got clean records
they can access about where everything is and what you want done
80-90: Downsize or get rid of stuff - hand off family
heirlooms one at a time in a way that is meaningful - and donate
household items you don't use anymore to charity, or to helping
your grandchildren set up their first places. Use more of your
money to live comfortably; don't stint on the hearing aids,
household help or handrails that keep you active and safe.
90-100 and beyond: Hire help, even if you don't need it -
it's nice to have some chores taken care of and your kids will
worry about you less. Spend your money on whatever makes you