We do agree that no two lifestyles and goals might look the same. What’s more, each decade brings about a new set of challenges and opportunities that might change your risk appetite and financial plan. To keep it simple however, here are some milestones that could benchmark your progress towards retirement.
In Your 20s… Start An Emergency Fund
As you start to earn your first salary, make it a habit to start saving. A rule of thumb when it comes to budgeting your income would be the 50/20/30 rule, where:
- 50% goes to necessities (eg, rent, groceries, bills, premiums)
- 20% goes to savings
- 30% goes to lifestyle wants (eg. dining out, entertainment, shopping)
Apart from adopting positive financial behaviors, try to gain some courage to take some (calculated) risks. It’s the best time to take risks when you’re still young, as you have less financial commitments. Learn more about your risk appetite, but don’t invest too conservatively as you have a long time horizon to let your money grow.
Money Benchmark: Have one to three times of your starting salary in savings.
In Your 30s… Manage Your Debt & Insurance Coverage
You might find yourself having a taste of huge expenses as you welcome your 30s. Whether it’s to settle down, buy a home, or start a family; your 30s might be the mark of your first long-term or big-ticket financial commitments. This is why you’d want to start clearing off your debt – fast.
When it comes to paying off debt, you’d want to start with the most expensive one. This could be your college loan or even the credit card mess you created in your 20s. Other than that, pay more than the minimum balance each month and try to halt all credit card spending (cut them away!) to curb further credit card spending.
As you start to earn, spend and work more; it’s also important to get comprehensive insurance. You’d want to make sure you have proper health insurance, car insurance, property insurance or even life insurance to safeguard your income and wealth.
Money Benchmark: Have three to six times of your current salary in savings.
In Your 40s…Begin To Build Your Wealth
Now that you’re in your prime earning years (hello, new bosses!), it’s time to seriously think about building your wealth. You should try to cut back on unnecessary expenses, increase your savings and look into mid-term investments and other growth assets.
Of course, your 40s might also be when you start to feel burnt-out, stressed from the new responsibilities at work or even the sneaky mid-life crisis. As you take care of your finances, it’s also important to take care of your wellbeing. Set some time for yourself to invest in healthy activities that may reduce stress and keep you healthy. Additionally, taking charge of your money with a solid financial plan might ease the anxiety of what’s to come in the future.
Money Benchmark: Have six to ten times of your current salary.
Are you on track, then?
Bear in mind that everyone has different financial goals and capabilities, and these are just recommended steps. For a better-suited financial plan, check out our SmartSearch tool to access a network of financial advisors that could help you; or play around with our Retirement Calculator to see how far you are from your retirement goals.