The No. 1 Money Move To Boost Wealth at Every Financial Milestone
Financial milestones change at different ages (and stages) of life. And while everyone's journey is different, you'd be surprised at how much overlap there is when it comes to how people approach these big moments.
As you live your life, it's usually a good idea to check in every now and then to see what others are doing. After all, what works for one person often works for another. If you haven't yet reached a certain milestone (or age), being informed could help you achieve great things financially-speaking.
So, what are the top money moves you should make at every financial milestone? Here's what some experts say.
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Financial Milestones: Planning Based on Age
You can make smart money decisions at any point in life. But if you're looking for a bit of life guidance, one option is to operate based on age. Just remember that not everyone shares the same career, family, lifestyle or long-term plans.
In Your 20s: Create a Financial Foundation
Your 20s are when you generally move beyond school life to working young adult life. That's why the best thing you can do for yourself is create a financial foundation. You can do this with the help of a financial advisor or, if your finances are simple, on your own.
Next up, consider your current debt load. As per the Education Data Initiative, the average student loan borrower owes as much as $42,673. It takes the average borrower 20 years to pay off that debt — without a plan.
If this sounds familiar, your best course of action might be to consolidate that debt.
"For student loan payments or any other debts that you've acquired with difficult interest rates, it's worthwhile to evaluate if you can consolidate the debt to one loan," said Nikki Newton, President at Private Wealth Management at UMB Bank.
As soon as you're able, start saving for retirement and other life goals. Newton suggested contributing the highest percentage possible to a 401(k) plan (provided you're comfortable doing so). If you can, up the contribution amount by 1% to 2% annually.
But don't stop with retirement savings. Focus on other things, like an emergency fund or down payment on your first home, too.
In Your 30s: Build Your Legacy and Values
This is when you'll want to start prioritizing your family's legacy and settling your own financial values.
Newton suggested meeting regularly — perhaps once a year — with a financial planner. That way, you'll have someone to talk to as you build net worth and work toward major life events.
If you have kids, include them in the conversation. Did you know that a lack of financial literacy costs the average person anywhere from $948 to $1,819 annually, according to the National Financial Education Council? Teaching your children early can help set them up for success.
Other options Newton suggested considering at this point in life include:
Purchasing life insurance if you have dependents
Start with estate planning (especially if you have significant financial or material assets)
In Your 40s: Review Your Goals
This is another decade of much change. So, one of the best money moves you can make is to simply review your goals and adjust them accordingly. This might mean figuring out when you want to retire and how much you'll need to do so. You might also want to start thinking about ways to financially assist your aging parents or make other future plans.
Don't let retirement be your only savings goal, though.
"Decide how saving for major purchases balances with your retirement savings," said Newton. "If you have college-bound children, are you going to pay for all or some of their tuition? Will your parents need financial assistance as they age? If not planned for, these type[s] of life events can cause financial disruption."
If needed, look for ways to increase your income. This can help you achieve those savings goals much sooner and keep you on track financially in other important areas.
In Your 50s: Build Wealth
It's hard to choose just one money move to make at any stage of life, but as you approach retirement, you'll want to focus on building as much wealth as possible.
To do this, Newton suggested focusing on the following:
Pay down high-cost debt (like your house)
Max out your catch-up contributions to any retirement plans or health savings accounts
Buy long-term care insurance
Determine when's the best time to draw from Social Security (you can start as early as age 62, but won't get the largest benefits check until age 70)
In Your 60s: Secure Your Nest Egg
A MassMutual survey found that the average retirement age is 62. At this point, then, you'll want to focus on securing your retirement (if you haven't already).
Some things that were necessary before — like life insurance — might not be now. Cutting out the non-essentials can free up money for other needs.
If you're in good health (which, ideally, you are), you might want to prepare for a lengthy retirement. This means having enough savings and smart investments that will get you through both good and tough times.
The average life expectancy in the USA is 78.4 years, as per the CDC. Newton suggested planning for at least five to 10 years beyond that.
Top Money Moves Based on Net Worth
If you'd rather make a financial plan based on your net worth rather than your age, you can do that. Jeremy Savory, founder at Millionaire Migrant, suggested doing the following at each major net worth milestone.
$250,000 Net Worth
Buy a run-down two- to four-bedroom property (possibly using a mortgage loan). Live in said property as you fix it up, then rent out the other rooms. Release the increased equity and purchase another place. Rinse and repeat.
$500,000 Net Worth
Reaching this milestone is huge, so take advantage of it.
"When you reach a net worth of $500,000 you should start to spread your now-elevated real estate exposure," Savory said. "You should also catch a bull run on gold, bitcoin, stocks, etc."
He also suggested keeping a 10% cash buffer so you can buy the dips or have a deposit.
$1 Million Net Worth
At this point, he suggested becoming "more vertically integrated" or starting a business in the field that helped you reach this point in the first place, drawing on your wisdom, including learning from mistakes.
Bottom Line
When all is said and done, remember this: Your life may change, so your financial habits should as well. Keeping the same old ones isn't going to do you any favors unless they also happen to work with your current goals and needs.
"The most important money move at every major financial milestone is stopping to reassess before doing anything else," said Scott Oosterhouse, Founder of Every Dollar Grows. "I've seen people start new jobs, get married, have kids or retire and still keep the same money habits they had years earlier, simply because no one ever told them to pause."
But as Oosterhouse pointed out, the old systems don't automatically change just because your life does.
"Taking a little time at each milestone to rethink cash flow, savings priorities and what money is actually meant to support helps prevent people from feeling behind later, even when they're doing 'all the right things,'" he said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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