Your 50s are when you can really enjoy all the work you did in the previous decades. Plus, if you took care of your finances in your 20s, 30s, and 40s, you’re still young enough to really enjoy it! In your 20s you hopefully had fun and explored, but also laid the foundation for your personal finances. Your 30s is where you really started to see the fruits of your labor, which only encouraged you to keep going. Your 40s is where you can really cement things down and take your foot off the gas. All of that will lead you to 10 financial milestones to reach before you’re 50!
1. Adjust For Growing Pains
Your personal finance journey is bound to have lots of ups and downs. There are many things you’ll have to tackle, including some major growing pains. Whether you’ve had tons of preparation or not, there are resources to help you stay on the right track. If you’re afraid because you have no idea what you’re doing, don’t worry! You’re not alone, a lot of people have been in your shoes before. The good news is that it’s easier than ever before to have access to amazing financial education resources – you just need to take advantage of them.
2. Set Up A Life Insurance Policy
If you aren’t currently covered, it’s probably a good idea to set up a life insurance policy. In the event of your death, you want to make sure your child (if you have any) has the financial support they need – and it can help your partner cover all the expenses that will come. That’s not an ideal situation for anyone, but it’s a huge boon when it’s needed. Honestly, once you’re approaching 30 you should look more into life insurance policies!
3. Use A Side Hustle To Augment Your Income
Side hustles are a great way to augment your income if you need it. It’s wise to have multiple sources of income, to help you be more diversified and stable. Beyond that, it can help you reach your investing and financial goals much faster.
You Have Options
If you don’t know where to start, check out my list of lucrative side hustles. It isn’t an exhaustive list, but it should give you an idea of where you can start!
4. Plan Your Retirement
You should’ve been taking advantage of your IRA and 401(k) options in the past. If you were able to save a lot for retirement, you may’ve even used a standard account with a brokerage – that is, something that isn’t a retirement account. If you haven’t taken advantage of those standard accounts, it’s time to do so now. Hopefully there will be enough in there so that you can retire early without withdrawing for your 401(k) or IRA prematurely.
Accelerate If You Need To
If you’re behind, or want to retire early, do your best to accelerate towards your goals as much as possible. Also, it pays to plan out a cash flow strategy ahead of time, which may help you retire even earlier!
5. Begin Using A Trusted Financial Advisor
Sometimes you need a bit of help – and that’s okay. If your personal finances are complicated, and too much for you on your own, look into hiring a financial advisor you can trust. Just a little help can make a world of difference!
6. Have Debt Under Control
Eliminating high-interest debt is one of the best uses of your money. Think of it this way, eliminating debt is a guaranteed return. As a general rule of thumb, I consider anything with an interest rate over 5% too high and an absolute emergency to take care of. Some people may disagree with that, but that’s my personal line. Tackle your existing debt with the best method that works for you.
You should’ve started when you were younger, so hopefully you’ll be free of debt by the time you’re 50. Well, free of consumer debt and most any other – it’s okay to not pay your mortgage off early if you don’t want to.
7. Build A Substantial Nest Egg
Emergency funds are a must. They protect you from disaster and can help you avoid taking on more unnecessary debt. Your best bet is to build up a strong emergency fund, probably using a savings account with a high interest rate like the one Axos offers.
If you don’t know where to start with an emergency fund, begin by saving the equivalent of one month worth of expenses. Once you do that, you can build more or move on to the next step. Based on your specific case, you may want to save up 6 months worth of expenses or more, but that is a good starting point for most people. If you can’t even save one month of expenses, you need to go back and redraft your budget. As you near retirement, you may want to consider saving up a year or more worth of expenses.
8. Update Your Will And Estate Plan
At the end of the day, estate planning is an absolute must! Making an estate plan sets up your family and is a good way to get your finances in order. On top of that, it gives you a clear insight into the current state of your finances and can give you a good idea about where you need to end up. Therefore, I consider this a must in your 30s as well as your 40s – especially if you have a family. If you did it in your 30s, hopefully there are only a few minor updates.
9. Refinance Your Home
Refinancing your mortgage can save you loads of money each month. If you want to lower that monthly bill, but don’t want to pay off the house, look into refinancing! Of course, this only works when lower interest rates are available, so it’s good to just keep an eye on that every now and then.
10. Pay Off Your Mortgage
So, I’d say in most situations you can say it’s worth it, depending on your perspective. However, it still depends on a lot of factors. While it is still worth it to have some peace of mind, that doesn’t mean it’s the optimal decision or use of your money. This issue is a little more nuanced than that. So, while it’d be nice to say firmly one way or the other, we can’t have a one-size-fits-all solution for this.
Investing Can Often Be More Profitable
I will say, the overwhelming majority of the time, investing in index funds and ETFs will have a greater pay out in the long run. A good long-term investment strategy is likely to beat out the cost of the interest on your home. However, paying off the mortgage early is in fact a guaranteed return – which is nice.
Peace Of mind Is Invaluable
As I said earlier, having the peace of mind that comes with no mortgage is wonderful. Any sort of debt-free life is wonderful, in fact. If your mortgage is paid in full, think about how much lower your expenses will be in retirement! This is a common trend with lean FIRE, and it’s nice to not have the headache of mortgage payments. Again, investing may be the optimal choice, but personal finance has more to do with your mindset than anything else. How much better would you feel if you didn’t have a mortgage?
Conclusion
Hopefully this gave you everything you need to know about 10 of the major financial milestones you’ll need to reach by 50. If you have any thoughts, or tips of your own, be sure to let us know in the comments.
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