Mistakes People Make at Different Ages
Financial challenges are not limited to a specific age, but people tend to face certain challenges during particular stages of their lives. Regardless of your age, you might recognize some of these financial issues.
In Your 20s
Living beyond your means. When you have your first good job, it’s tempting to spend money on the latest and greatest gadgets, entertainment and eating out, and travel. But if you can’t pay for your wants up-front, you need to rein in your lifestyle. Too much debt can hold you back financially for a long time.
Not saving for retirement. You’ve got plenty of time, so harness that time to work for you. Start saving at least 3% of your annual salary now (more would be better), and your 67-year-old self will thank you.
Not being financially literate. Learn as much as you can about saving, budgeting, and investing now so you can benefit from it for the rest of your life.
In Your 30s
Being house poor. Whether buying your first home or trading up, don’t buy a house you can’t afford. Build in some wiggle room for a possible dip in household income.
Not protecting yourself financially. Life is unpredictable. What would happen if you were unable to work and earn a paycheck? Let go of the “it won’t happen to me” attitude and protect yourself with life and disability insurance. The younger you are when you purchase coverage, the lower your premiums will be.
Still not saving for retirement. Maybe your 20s passed you by and retirement wasn’t on your radar screen. Now that you’re in your 30s, it’s critical to start saving. Wait longer, and it will be hard to catch up. Start now, and you have 30 years or more to save.
In Your 40s
Trying to keep up with the Joneses. The nice homes, cars, vacations, and “stuff” that others have might look appealing, but appearances can be deceiving. Your neighbors could be taking on lots of debt.
Funding college over retirement. If you have limited funds, set aside a portion for college, but earmark the majority for retirement. Then sit down with your teenager and discuss academic options that your family can afford.
Not having a will or an advance medical directive. No one likes to think about death or catastrophic injury, but these documents can help your loved ones immensely if something should happen to you.
In Your 50s & 60s
Co-signing loans for adult children. Co-signing puts you on the hook if your child can’t pay, a situation you don’t want to face as you’re approaching retirement.
Raiding your home equity or retirement funds. Obviously, doing so will prolong your debt and/or reduce your nest egg.
Not calculating your retirement income. As you approach retirement, you should know how much you can expect from Social Security, pension income, and your personal retirement savings.
These are just a few of the financial challenges you might face throughout your lifetime. There’s a saying that wisdom comes with age, but it pays to be financially savvy at any age.