WASHINGTON (Reuters) - 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 monthly.
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 inclined.
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 portfolio-tracking program.
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 with it.
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 happy.
Linda Stern is a Reuters columnist. The opinions expressed are her own. The Stern Advice column appears weekly, and at additional times as warranted. Linda Stern can be reached at firstname.lastname@example.org; She tweets at www.twitter.com/lindastern .; Read more of her work at blogs.reuters.com/linda-stern; Editing by Prudence Crowther