Grandfather teaching grandson how to manage finances by counting coins.
19 July 2021

Money management may seem like a daunting task, particularly for those hitting certain milestones in life. From savings to insurance coverage, money management can be overwhelming if you’re not sure where to begin or how to reach your financial goals efficiently. Fortunately, there are specific financial steps you can take to make the journey a bit easier. 

Here is how you can take ownership of your finances during life’s transformative ages.


How to Manage Money in your 20s

For many 20-somethings, managing money feels like a necessary but often far-removed concept. This may be because in the early stages of your working life, finding financial stability takes effort. However, your mid-twenties presents an opportune time to get your financial house in order by creating smart habits for your present and future self. This time of life is often marked by steadier income as well as transitions that require some level of financial planning and management. But it all starts with understanding your current financial position.


How to Budget Out of College - Managing Income, Debt, and Savings

In your mid-twenties, having the available cash to spend on items you want is exciting. However, it’s important to create a smart plan for those hard-earned dollars to keep yourself and your goals on track. It’s helpful to take a step back and consider what can and should be managed from a savings and debt perspective. Building strong financial habits in the realm of savings is crucial to creating financial stability and well-being for the long run. At the same time, it’s necessary to balance savings with debt repayment. This all comes together with a well-kept budget.

When making a budget, consider your income as well as expenses, including fixed (such as rent/mortgage, car payment, etc.) and variable expenses (dining out, gas, etc.). It’s important to set up a budget so you can keep track of how much you’re spending and if there are any areas in your financial life that you could cut back on to save more money. Not only can this help you establish healthy saving practices now, but also in the future.

After tracking your earning and spending, the next essential step is to determine what you need to have set aside for an emergency fund. Many experts suggest having no less than three months’ worth of expenses saved for financial unknowns. On the debt front, take some time to organize what you owe, including student loans, credit card balances, and other debts. Based on how much you owe, the interest rate charged on those debts, and the monthly payments, try to develop a repayment plan. Be sure you are paying the required minimum payments, and if you have extra money each month, consider putting some toward your debt balances. 


Transitioning to Your Own Health Insurance

Turning 26 is another financial milestone for those who are on a parent’s health insurance plan. Coverage is no longer available to dependents at this age, making it necessary for adult children to find their own health insurance plan. If your employer offers health coverage, try checking with your benefits coordinator at work to determine your options, the cost, and the process for getting signed up. Turning 26 is a qualifying life event with most health insurance plans, meaning you have a short window of time to enroll in a new plan. Getting your own coverage can be an invigorating step in adulthood, so keep age 26 in mind and be ready for your new plan when the time comes! 


Thinking Long-Term and a Plan for Retirement

Individuals in their mid-twenties can also take control of their financial life by thinking about their far-off future. Considering how much to save for retirement may not seem like a financial goal to plan for right now. However, having a savings strategy now can make a world of difference when you reach the end of your working years. If you have an employer-sponsored retirement savings plan, such as a 401k, available through work, consider your ability to save in the plan and educate yourself on how it works. If a plan is not available or you want alternatives, seek guidance on individual retirement account options. No matter how you do it, creating a savings strategy for retirement will pay off tremendously for you in the future.


What to Consider at Age 55 (and Older)

Different financial considerations move to the top of the priority list for those who are planning to retire in the next five to ten years. Individuals at age 55 or older may be giving more thought to how well they have fared in terms of retirement savings, how to manage healthcare in retirement, and what to do for the later years in life. As with twenty-somethings, your mid-fifties present an opportunity to assess your overall financial position while planning for a healthy financial future.


Assessing Your Retirement Progress

Before leaving the workforce, it is necessary to know where you stand from a financial perspective and how to plan for retirement. This task is no small feat; it requires some degree of calculation as to how much money you will need in retirement to cover living expenses, hobbies like travel, and a buffer for unexpected costs that may arise. A general rule of thumb is taking a percentage of your current income, such as 70% or 80%, to gauge what you will need in your retirement years. Part of this may be covered by monthly benefits, like Social Security or a pension. The rest is likely to fall on your shoulders—in other words, it comes from your retirement savings.


Increasing Savings and Managing Investments

If you’re not feeling confident in how much you have set aside for your retirement up to this point, several options exist to boost your retirement savings. Catch-up contributions in retirement savings accounts are available for those age 50 and over. Your employer-sponsored plan, like a 401(k) or 403(b), as well as individual retirement accounts like traditional and Roth IRAs, all allow for additional contributions for older workers. These catch-up contributions are specifically designed for catching up on retirement savings you may not have had the opportunity to set aside in previous years. 

In addition to these extra savings, managing your investments differently may be beneficial. Shifting down in terms of the risk you’re taking on in investment portfolios can make a significant difference in being prepared to start taking withdrawals in retirement. Not everyone wants or needs a less risky investment mix; however, it’s worth assessing your overall investment strategy as you get closer to retirement.


The Bottom Line about Controlling Your Finances

Whether you’re in your mid-twenties or are preparing to transition out of the workforce in your mid-fifties, taking ownership of your financial picture is necessary. Younger individuals can focus their efforts on creating and implementing sound financial habits, including savings, understanding benefits through work, and managing debt repayment efficiently. Older workers benefit from shifting their focus to relying on other sources of income, including government benefits and their own retirement savings. Each age group has unique challenges to work through. Fortunately, many opportunities for optimizing money management exist at the same time. 

Need some help working through the details? Get in touch with the Teachers Trust and Financial team today. Together, we’ll help you organize your financial life and plan for the future.