10 Financial Lessons To Learn In Your 20s, 30s, 40s and 50s

Just because you have more money doesn’t mean you have to spend more money

The key to knowing the difference between lifestyle creep and simply enjoying a higher level of income lies with your goals. There’s nothing wrong with spending your money on purchases that make you happy. It’s only when you overspend and threaten your progress toward your long-term goals like buying a house, continuing your education, and saving for your kids’ college tuition that you need to take steps to rein things in.

Don’t wait until your kids are 18 to start thinking about how you’ll pay college tuition

If you’re at a phase of life where you have young children, now’s a good time to start thinking about what their college tuition needs may look like. If you plan on providing some financial assistance — whether it be for their entire undergraduate education or just the first year — you’ll likely want to save or invest for it while you still have a long time horizon to do so.

Saving for your kids now will help them avoid taking on too much student loan debt to pay for college. While a high-yield savings account can be helpful for saving for large purchases, a 529 plan might be the better tool in this case. A 529 plan is a state-sponsored savings plan designed for funding a college education. The growth is tax-deferred and withdrawals are tax-free for qualifying education expenses.

Even if you’re unsure how much financial aid or institutional scholarships your child will qualify for once they start applying to colleges, having some money set aside for them is still a lot better than having nothing at all.

Paying down debt improves your financial flexibility

One of the best ways to protect your financial future is to pay down any existing debt you hold. That money you spend on loan balances and credit card statements can then be used to build your savings, invest in the market and live your best life.

High interest rates often prevent people from paying off debt because they suck up money you want to go toward the loan’s principal. This is a familiar problem to anyone with significant credit card debt, but using a balance transfer credit card with a 0% intro APR period would allow you to make payments toward your balance without being charged interest for a limited time period. This gives you time to focus on paying down the debt’s principal and freeing yourself from a big financial burden.

The Citi® Diamond Preferred® Card is one solid contender since it offers 0% for 21 months on balance transfers, then 17.74% to 28.49%. It does come with a 5% balance transfer fee, which is fairly typical of many balance transfer cards. The Discover it® Balance Transfer credit card weighs in at a lower balance transfer fee — 3% of the balance — but offers a 0% intro APR period on balance transfers for the first 18 months, then 16.74% to 27.74%.

Don’t stop increasing your income

Some common ways to earn more money are to ask for raises at work when appropriate and change jobs for a more significant salary bump.

Reaching your financial goals is often a team effort

Your 40s can be filled with big-ticket expenses, especially if you’re buying a home, expanding your family, paying for a child’s college education, caring for aging parents and increasing your retirement contributions. All these middle-age milestones can feel daunting to manage, but the good news is you don’t have to do it all alone.

If you’ve never worked with a financial planner before, now would be a great time to find one. They can often take a look at your financial circumstances and goals and offer advice you may not have considered. They’re also able to help you plan for a variety of events, including retirement, divorce, marriage, loss of income, an increase in income and more.

Financial planners excel at spotting opportunities that help you reach your most significant goals. So even if you have your own degree in personal finance, you can still benefit from consulting with a planner to get additional advice.

To find a financial planner, start by seeing if any services are offered by your employer as a benefit. If this isn’t something that’s available to you, you can use Zoe Financial’s matching tool to filter financial planners based on your needs.

Catch-up contributions can make a bigger difference than you might think

For 2023, individuals are allowed to contribute up to an additional $1,000 to their IRAs (both Roth and traditional accounts). This brings their contribution limit up to $7,500. So let’s say a 50-year-old takes advantage of that increased limit and contributes $7,500 per year until they leave the workforce at the traditional retirement age of 65; they will have contributed $112,500 over the course of those 15 years. But if they had adhered to the $6,500 contribution limit for people under age 50, they will have stashed away $97,500 over 15 years.

That $15,000 difference may not seem like a life-changing amount, but it can grow exponentially since it’s being invested. Plus, outliving one’s savings is a major concern for many older individuals. Stashing away as much money as possible while you still earn an income can help lessen the likelihood that you’ll run out of money after entering retirement.

Don’t wait until the last minute to think about medical care in retirement

Out-of-pocket healthcare expenses can really eat away at your retirement savings once you’re no longer working and don’t have an employer-sponsored health insurance plan to fall back on. According to Fidelity’s 2022 Retiree Health Care Cost Estimate, the average couple who retires at age 65 can expect to spend around $315,000 on healthcare expenses in retirement.

Because of this, you don’t want to wait until you’ve already retired to start thinking about how you’ll afford any medical care you may need. Use this last decade before retirement to fill any potential gaps in what you may be able to afford in the future.

This is another area where it could make a lot of sense to talk to a financial planner who can recommend specific savings vehicles, like a health savings account, to help you grow your nest egg for health care costs even quicker.

Individuals at different life stages likely have different financial goals they’d like to prioritize. While these lessons are great starting points, it’s important to consider what you personally would like to achieve and which goals fit your personal circumstances.

When in doubt about what moves make the most sense for you, consult with a financial professional who can provide personalized advice.