5 Realistic Money Goals By Age!

Transcript:

On this episode of the Personal Finance Podcast, we're going to be talking about 5 realistic money goals by age.

Up everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of Master money.co. And today on the Personal Finance Podcast, we're going to be talking about 5 realistic money goals by age. If you guys have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co and follow us on Spotify, Apple Podcasts or whatever podcast player you love listening to this podcast too.

And if you want to help out the show, leave a five star rating and review on Apple Podcast. I cannot thank you guys enough for leaving those five star ratings and reviews. It truly helps us spread this message that anybody can build wealth. So today on the podcast, we're going to be talking about one of my favorite topics, really realistic money goals by age.

And this is something that I want to talk through by age because you're trying to figure out, hey, what is the next thing I need to be doing? What should I be accomplishing each decade so that I ensure that I'm on track with my money over time? So this is the time to do some of these realistic money goals. And we are so incredibly excited to share some of these with you.

So why do we do these by age episodes? The reason why we do these by age episodes is I think separating your financial life into segments or into seasons or chapters, whatever you want to to call them, truly helps us think through and compartmentalize how we can start to build wealth. Because you don't want to try to do everything all at once.

That's why we created the Stairway to Wealth to give you the exact order to allocate your dollars so that you can figure out where your money needs to go. And an index fund Pro, for example, we talked through the exact order you need to invest your dollars, looking at retirement accounts for most situations.

So this is the thing to think through is as I go through life, what do I need to be accomplishing? What do I need to be doing? That is what this episode is all about. So if that's something you're into, let's get into it. All right, so the first one we're going to be talking about is your 20s.

And the first one in your 20s is to build up your human capital. I think this is the most important thing that you can do in your 20s is to build up your skills, build up your knowledge, and do as many things as possible for your personal development. Why is this so important to do early on? Because doing these things and allocating your time and your dollars towards yourself and your personal development is going to allow you to make that much more money over time.

What do I mean by that? You're going to be able to increase make your income with new skills. The reason why that is so important is increasing your income is the catapult to building wealth. It is the way that you can actually accelerate your path to wealth by having extra dollars. Because as your income increases, you can take those extra dollars and you can invest those dollars.

And as those dollars start to snowball, what's happening here is all of a sudden one day you don't have to work another day in your life because you're investing those extra dollars. And as you do this, it makes your life so much easier because you have more money to allocate towards your emergency fund.

You have more money to allocate towards the things you want in life. Maybe you want to travel more in life so you can put more dollars towards your traveling. This is what wealth does. And allowing yourself to earn more money is something everybody should be focusing on, especially in your 20s. And the way to do that, the way to earn more money is to build up your skill set, especially when you're young.

Now, one thing I want to note here, if you're in your 30s or your 40s and you're listening to this episode and you haven't done the stuff in your 20s, do the stuff in your 20s first. Work through some of that stuff first so that you can build that financial baseline and then work on the 30s and 40s as you progress. Everyone is at a different stage in life as they get to the point where they actually realize, OK, I need to start building wealth.

They want to become a wealth builder. Well, that's the time where you can look at some of these other decades and say, hey, what are the decades before me need to be doing? And I'm going to start doing those things first. So building that human capital. What do I mean by this? What are some of the things that you can do? The first thing you can do is invest your time into things to learn ways to increase your income.

So one way to do that is if you have a specific career path that you know you're going to stay in, then maybe you invest into certifications within that career path, or maybe you invest in additional education that's going to increase your income. Or maybe you add some skills. You invest in courses or you invest in books that you can learn over time so you can increase your skills, some amazing skills to to look at or sales.

For example, sales is the number one skill to have if you want to increase your income because every single industry you need to sell something. And maybe you don't know you have to sell something, but maybe you're selling your boss on why you need to get promoted and make more money. Maybe you're selling a client on why they need to come on board so that you can earn more revenue for your business.

Maybe maybe you're selling to a boardroom on why they need to be investing in certain companies. There's so many different ways that you need to be selling in every industry that it's incredibly important that you do this. Another way to build your human capital though, is to get more experience in life.

So maybe traveling or additional life experiences or maybe saving enough money so that you can work under someone who you truly admire. And maybe you're not making as much money, but you're learning so much more. There's so many ways to invest in yourself. That's what you really need to be doing first. The easiest and cheapest way to invest yourself is buying and reading books.

Books are 10 to $20 each book, and you can learn an incredible amount in books. This is the way I really started was I read a book every single week. And by doing that, I learned so much more about building wealth, about how to do certain things. I built up so many additional skills just by reading books, investing in courses, an amazing way to do that.

There's so many amazing online courses and the reason why I invest in courses now is because if I want to figure out something and I want to figure it out quickly, I don't want to flip through 25 different books. What I want to do is take the course that walks me step by step through those steps so that I can move on with my life and get my time back. So that is a reason to invest in course.

You could do coaching, so investing in a personal coach that's going to walk you through some of the steps. Maybe you want to increase your fitness level so you hire a fitness coach. Maybe you want to take your business to the next level so you hire a business coach. There's so many different things that you could be doing, so making sure that you do this in the right way is incredibly powerful.

The second goal in your 20s is managing your debt and having a debt pay down plan if you have debt at all. So making sure that you do not add debt in your 20s is really important unless it's low interest debt, something like your mortgage we are OK with here at the personal Finance podcast. But adding additional debt for no reason is something you definitely don't want to do.

And if it's high interest debt, meaning any debt above 6% interest rate, you definitely don't want to be adding that in your 20s because you're going to be working for a very long time to pay that debt off. So not adding any debt and having a debt payoff plan. Maybe you have student loans, maybe you have car loans, all of these things.

Putting together a debt payoff plan is incredibly important to do in your 20's. The next thing is to put together a automatic retirement savings plan. So what do I mean by this? What I mean by this is you want to start saving for retirement and you want to start investing those dollars. So the first place to look is if your company has a four O 1K plan, then making sure you get that four O 1K match so that you can invest those dollars automatically into that account.

The next thing you want to look at is should I go into a four O 1K or should I go into something like a Roth 4O1K or a Roth IRA? We prefer the Roth first here at the Personal Finance podcast, but there's a number of options on why you want to go to an IRA if you're a really, really high earner. So there's a couple of things to think through there, but I like the Roth for a number of reasons.

Obviously your money grows tax free and you can pull the money out tax free, but in addition, you don't have to worry about future tax rates if you put your money in a Roth in comparison, if you put it in just a standard 4O1K. Now there's Roth 4 O1 KS that a lot of companies offer now, and that would be my first option.

And the second one would be the Roth IRA would be my second favorite option. So if you haven't heard the Stairway to Wealth, we kind of talk through some of this stuff. So check out that episode if you're new to the podcast. The next goal is to get your first credit cards. We usually have our favorite credit cards linked down below in the show notes, but getting your first credit card allows you to start building up a credit line.

Now, a lot of financial gurus out there will say credit cards are the enemy, and they are. If you've had a history with bad credit card debt, maybe you've picked up credit card debt in the past. Well, you do not want to be doing this step if you've been in credit card debt before. Instead, I would rather you be paying for cash than utilizing that credit card.

But there are a few reasons why you want to get a credit card. The first one is you want to have some credit history in place. If you don't have any credit history in place, it's very difficult to build up a credit score. And your credit history is a major factor when it comes to building up a credit score. The second thing is, is it allows you to collect points and miles and points and miles are going to allow you to either get cash back on things or you can use them for free travel.

We have an episode talking about travel hacking. If you haven't heard that episode, it is one of my favorite things to do with credit card points and there's a bunch of amazing credit cards out there. The way to look at this is how do I spend my money every single month and how do I want to use those points and miles? Because when you're choosing a credit card, you want to look for one.

A do I want cash back so I can spend it on things that I like or am I interested in traveling the world? What is the reason for me collecting these points and miles? The second thing to look at is am I brand new to credit cards? Will I even qualify to open a flexible credit card or do I need to get something like a secured credit card, which basically is like a debit card that helps you build credit is essentially the easiest way to think of it.

And the third consideration is where do I spend my money? Do I spend a lot of money on restaurants? Do I spend a lot of money on groceries because each card has its additional benefits based on cash back? Do I spend a lot of money on travel? Am I traveling? Do I need a business card? All of these different things. Some of my favorite cards are linked up in our favorite credit card link down below, so you can check those out and see which one may work best for you.

If you're interested in travel hacking, my two favorite starter cards are the Chase Sapphire and the Capital One Venture. Those are two of my favorite cards out there that you can go and get and then goal #5 is to get comfortable with investing. If you are just getting started investing, you've never invested before, getting comfortable with investing in your 20s is the most powerful thing that you can do.

You want to invest your dollars as early as possible because time is actually even more important than your rate of return. The longer your time horizon of when you started to invest, it's actually comes out so much more important than somebody who starts investing later and has a higher rate of return.

To say for example, someone starts at 22 and they start investing $400.00 a month at an 8% rate of return. And someone starts at 32 and they start investing $400.00 at a 15% rate of return. The person who started at 22 will still come out ahead. And in fact, you can invest less dollars than the person who is investing at 32 and you could still come out ahead.

So it is so incredibly important and it's so much easier on your life if you start investing as early as you possibly can. I cannot stress this enough. If you're in your 20s now, let's jump into the 30s. All right, So the goals in your 30s are going to shift a little bit, and the first one is to get your savings rate up.

And preferably we like to have your savings rate at 25% or above once you get into your 30s. Now, in your 20s, you can get away with 15 to 20%, but you want to get that savings rate as high as possible when you hit your 30's. The reason for this is if it's too much lower, then you're going to be working for a much longer period of time than if you increase that savings rate.

Now, a lot of people in their 30s, they increase their lifestyle and their lifestyle inflates because maybe they're having kids, they want to buy the new fancy car, they have a midlife crisis. I don't know what the situation is, but there are a lot of reasons why your lifestyle would inflate. So making sure you can try to maintain that lifestyle but increase your savings rate is the way that you can get to that point.

If you're struggling to save more money, increase your savings rate by 1% every month or every other month until you get to the point that you need to get to. That is a way to slowly get there without having to address as much as it would be if you just RIP the Band-Aid off right away. Goal number 2 is to get a credit score 700 or above. 700 or above is going to allow you to have a lot more options and decrease your interest rate when you're buying a house or when you're buying a car.

And preferably, we'd like you to get above 750, but at least getting above 700 so that you can get to the point where you're going to save yourself hundreds of thousands of dollars on interest as you progress throughout life. Now, how do you do this? There's a number of ways to do this. One is to make sure you have that credit history in place and you've started having that credit history in place.

But some of the big ones are making sure you have your credit history and your credit history is OK. So making payments on time, having a long credit history are two very big ones. Another one is to make sure that your credit utilization is low. Meaning if you have a credit limit, say for example across all of your credit cards that's $10,000 and you're using $2000 every single month, your credit utilization is at 20%.

So people with really high credit scores keep their credit utilization at 10% or below, and people with credit scores above 800 typically keep them below 7% on their credit utilization. That is a major factor in your credit score that a lot of people don't understand. So increasing the amount of credit available to you and lowering the amount of credit that you're utilizing is going to be a very important thing as you're starting to build credit.

Then once you have multiple credit lines, then your credit utilization should start going down naturally. Goal #3 is you need to have a will in place. Having a will in place is one of the most important things that you can do. So my favorite place to open a will is at Trust in Will.

And we've talked about this in the past as well. We've had an episode on this. We'll link it up in the show notes below so that you can check that out. But making sure you have a will in place, I think everybody over the age of 18 should have a will in place because it just helps you get your finances in order. It's not a very expensive thing. If you do it online, it's a couple 100 bucks.

You have a will in place and everything, including your investments goes to the correct person. Now every belonging you have, if you have children, you definitely need to have a will in place. Everything in life is going to go to the correct person. Now when it comes to your investments, you need to make sure that you assign your beneficiaries because that is the true indicator of where those investments are going to go.

But everything else needs to fall underneath your will and for a couple 100 bucks this is worth your time. Trust in will walks you through the process really easily and I love how easy they make it. Now should you have a trust or a will? Well if your net worth is above $1,000,000 then you can start to consider a trust.

But if it's not above $1,000,000 a will is perfectly fine. And even if you have a trust, you're going to want to have a will within that trust in place anyway. So starting off with the will is the best place for estate planning. In addition to this estate planning you want to have life insurance in place if you have dependents and just simple term life insurance is the best route to go.

I got mine at Policy Genius and they are fantastic. They make the process incredibly easy and all you do is answer some simple questions and you can get life insurance. Now term life insurance is my favorite because it is much cheaper than other forms of life insurance. Now one question you may have and you may be seeing this all over social media is, is life insurance an investment?

My quick answer to that is no, it's not an investment. You have to have a very specific advisor in place who knows exactly what they're doing to even consider that for 99.99999% of people it is not an investment. So you're going to see people all over TikTok or Instagram saying it is an investment.

It's absolutely not the case. Goal #4 is a fully funded emergency fund. You want to have that fully funded emergency fund in your 30s with six months expenses. The reason for this is because it protects you against life. Something is going to happen in life, you need to have that emergency fund in place.

And as you're going to see is when we hit our 40s and 50s, we're going to be wanting to grow that emergency fund as well. Because as you approach retirement age, you want that emergency fund to get larger so that you have more protection as you need to live off your portfolio or your other investments. And then goal #5 is your income should be growing steadily.

Now, if you're making a career change in your 30s, I understand maybe you have to make that leap and reduce your income. But for most people, you want to start to see your income increase steadily. And if it's not increasing, you got to think through why is that happening? Because you need that income to increase so you can invest those extra dollars so that you can retire that much faster.

And if you're interested in financial independence, you want to really accelerate that savings rate so that you can get there either by the end of your 30s or your early 40s. A lot of people who are really aggressive in their 20s can retire in their 30s, mid 30s, late 30s. And this is a great path to take, but that's not for everybody.

And if you're trying to retire in your late 40s or 50s, and that's something you can very well do as well, but you need to have that increased income so those extra dollars can fuel that fire. So look for ways to increase your income at your day job first, side hustle second, or maybe even starting a side business.

Now let's jump into the 40s. All right, so your 40s are a time where there's going to be a lot of progress happening. Maybe some of you are retiring or maybe some of you are getting to the point where you're getting ready to retire. But in addition, in your 40s, this is where you can accelerate your path to wealth as well.

The first goal is to set up a dream fund because you can do this during any decade. And I would advise people to do this during any decade. But the first thing you want to do is just set up a dream fund because as you start to age, you want to make sure that you're allocating as many dollars as possible to enjoying life. What do you dream of doing?

Ask yourself some of these questions. Do you dream of traveling across the world? Do you dream of going to every football stadium in the country? Do you dream of opening a little ice cream shop on the beach? What do you want to do with your life? And open a fund where you can start saving dollars towards that dream.

This is one thing that a lot of people don't talk about and you need to be doing this because your dollars are there and they are there to allocate towards your happiness, towards your joy. In addition, they're there to reduce your stress and anxiety with things like an emergency fund. So there's multiple things that your dollars are there for, but all of them should be positive.

It should not be a point where your money is something that is a source of negativity. So the way to do this is to start saving your dollars in different categories. And the dream fund is a major way to put it towards your joy, to put it towards things that you actually value. So one big thing for me is traveling as much as possible.

So putting dollars in my dream fund towards traveling is going to be something I definitely want to do. I want to take my two sons around the world. I want them to see the world. So this is something where we're definitely allocating as many dollars while they're young so that as they progress and as they get older, we can take them around the world at the time that they remember it.

So there's so many different things that you want to think through with this dream fund, but ask yourself the questions of what brings you joy, what brings you happiness, and how can you allocate dollars towards that? Number 2 is you want to boost your retirement funds. So boosting up your retirement funds, making sure you're allocating extra dollars towards retirement because as you progress towards retirement age, you wouldn't have that extra money in place.

So increasing your contributions to your 4O1K or your Roth 4O1K or your four O 3B, whatever you have with your employer. In addition, increasing your IRA contributions, your Roth IRA contributions, your HSA contributions are so many different things that you could be allocating your dollars to, but making sure you're boosting those as well.

And that perfectly aligns with goal #3 which is to Max out your HSA. So your HSA, if you don't know about this, it's a super retirement account. You can do this with any decade. We recommend doing it as early as possible. But in your 40s, definitely make sure that you're trying to Max out this HSA. Why? Because it has triple tax benefits.

What do I mean by that money goes in tax free. You can invest those dollars and those dollars can grow tax free and you can pull the money out tax free as long as you have a qualified medical expense. But the IRS states that there is no timeline to how old that medical expense has to be.

So you could have a medical expense from when you were age 18 and pull money out that's qualified when you're 65 and that works fine. So an HSA is actually stands for a health savings account. And what you do is you put dollars in the HSA and you can invest those dollars, they grow and then you save your receipts.

We save them a Dropbox or Google Drive, whatever platform you like to use. And then you can utilize that as backup when you pull money out for qualified medical expenses later on in life. So an HSA is a really powerful account. We absolutely love it. And if you haven't heard the Stairway to Wealth, we talk about it in there as well.

But we have an entire episode on the HSA called the Super Retirement Account. We talked through all the details on that in that episode. Goal 4. Is if you have a mortgage, make a plan to when you want to pay off that mortgage. Do you want to have it paid off prior to retirement?

That's what I would prefer is to have it paid off prior to retirement. Or are you going to carry that mortgage into retirement? Because if you pay it off before retirement, that significantly reduces your expenses so that you don't have those expenses that you have to save up for as you're starting to prepare for financial independence and retirement.

So think through your plan. Do you want to pay off your mortgage or do you want to keep that mortgage within your budget because you'd rather save those dollars and invest those dollars? Kind of think through that. But my preference would be to pay it off because A, gives you an additional safety net. B, you have those extra dollars in retirement that you don't have to save up for now if you are behind on retirement savings.

And I would personally much rather invest those dollars because you get a higher rate of return typically when you invest those dollars. But just making sure you have that plan in place and thinking through that is incredibly powerful. And then goal #5 is to start to get towards a one year emergency fund in place. Now, some people may disagree with this.

The reason for this though, is that you're approaching towards retirement age. And as you get to retirement age, you want to make this easier for yourself. Because when you live on your portfolio, there may be really bad down years. And in those really bad down years, I would much prefer to have some cash on hand, maybe 1-2, three years of cash on hand that I can live on so that when the market is really, really low, I don't have to pull from the market at its lowest prices.

So this is just an extra safety net. You don't have to do this, but this is what I do and this is what I progress towards is having more cash on hand. Now sure, that cash goes down in value over time. I completely agree with that because cash is something you really want to get out of your account and be investing and getting those dollars to work.

But as I progress in age, cash is security. Cash is the thing when you have cash on hand, it is the one thing that can be security for you. So having that security net in place is incredibly powerful. But then getting the rest of your money out of your savings account, unless you're saving for a short term savings goal or an emergency fund is something you definitely want to do and get it into investments.

You should have as many dollars as possible working for you, but having this additional cash as you get close to retirement age is just an extra safety net that you can have. Now, let's get into the 50s. All right, so we are in the 50s now, and within the 50s, there's a lot of things that are happening as you get to your 50s, but you have some extra benefits when it comes to retirement accounts.

And in addition, you are able to get to the point where you're getting much closer retirement age and where you can start drawing down on Social Security and all those other things. Now, should you rely on Social Security if you're in the USI would use it as an extra bonus or some whipped cream on top, because as you get closer to that age, we don't know if Social Security is going to be around in the future.

People have said that for decades and decades and still around at the time of recording this, but it's just an extra benefit that you can have. But taking care of your own retirement, not having to rely on the government is the best possible plan. And then having that extra income coming into play is something that you definitely want to be doing there in the future.

So the first one is goal number one. You should be taking advantage of ketchup contributions. What is a ketchup contribution? So when you invest in your 4O1K or your IRA and you're over the age of 50, you have what are called catch up contributions that are available to you and you should be taking advantage of these means.

It's an additional amount of money that the IRS allows folks over the age of 50 to investor dollars into these retirement accounts so that they can catch up for retirement. So you have this decade to be able to use it to put extra dollars in those catch up contributions.

So making sure you're taking advantage of those just allows more dollars to get into those accounts and you can take it those tax advantages. In addition, that money is going to be compounding. Goal number 2 is you want to reassess your asset allocation. What is asset allocation? It means how much stocks, bonds, all of those things that you have reassessing your asset allocation means what is my risk tolerance now that I'm at this age and what do I need to adjust so that I'm comfortable with My Portfolio?

A lot of people as they get closer to retirement age, they adjust their portfolio to have more bond exposure than as much stock exposure. For me right now, at the time recording this, I'm more interested in having more stock exposure just because I understand how the market works. But if you want your portfolio to be less volatile, meaning going up and down less than more bond exposure historically has allowed that to happen.

So thinking through what your asset allocation is and would you like to have more bonds on hand or would you rather have more stocks in your portfolio over the long term is how you want to think through this. So your risk tolerance is the biggest factor that comes to play goal #3 is to have more cash on hand so that when you hit retirement age, you have that cash in play.

I like at least two years or more, but some people are going to disagree with me on this again. But having this cash in play, like we said in the 40s, is your extra safety net. It allows you to make sure that you don't ever have to go back to work again if something happens to the market or if you have any other issues.

So having this two years of cash in play just allows you to have an extra safety net through retirement and just going to make you more comfortable. It's going to make you at ease mentally and it's going to reduce that stress in retirement. Too many retirees don't have any cash on hand and they get really, really stressed out.

So making sure you have that cash on hand is something I definitely would could consider. Goal #4 is to look at long term care and healthcare. So thinking through in your 50s, what am I going to do as I age if I can't take care of myself is what long term care is.

Now there's insurance out there that you can get. It's very expensive and very complicated. Or you can think through, am I going to live with my children or what am I going to do? In addition, your healthcare costs will rise. So thinking through how you're going to look at your healthcare costs, Are you going to be on Medicare? What are you going to be doing in the future?

So thinking through all that stuff is very, very important. And goal #5 is your estate plan should be bulletproof at this point. Everything should be in place. Your will, if you have a trust, your trust should be in place for your life insurance. All of these different things. Everything should be allocated towards the correct beneficiaries.

If it's not, you need to think through this stuff as well. Maybe if you're confused about it, you don't know how to do it. You can talk to an attorney if you want to look at Trust and will. Trust and will is a fantastic place where they just walk you right through it. The costs are much cheaper, but if you want to make sure that everything is explained to you step by step, then you can also do it with an attorney and just know the costs are just going to be higher.

But there's nothing wrong with hiring attorney. Attorneys are fantastic for these types of things. So these are the five realistic money goals for every single decade. If you guys have any questions, make sure you hit us up on Instagram or TikTok. We hope you learned a ton in this episode and we truly appreciate each and every single one of you listening to this podcast.

And thank you to everyone leaving those five star rating and reviews. If you got value out of this episode, send it to a family member or friend. Thank you guys again for listening to this podcast episode and we will see you on the next episode.