Master your money at every age

Be in control of your money at every stage of your life

Rosie Murray-West – Virgin Money Living Mentor

by Rosie Murray-West | Independent Money Mentor

Award-winning personal finance and news journalist

Taking control of your finances is important at every stage of your life, but your needs and priorities when it comes to your cash will change at different times.

Managing your money appropriately for your life stage isn’t all about budgeting for wild parties in your twenties and expensive cruises in your seventies. Instead, it involves taking a careful look at the money that is coming in and setting financial goals that will help you to live well both now and in the future.

So whether you are starting out in your first job and wondering whether you really need to pay into a pension, or carefully budgeting for your retirement, it is worth checking whether your cash is working as hard as possible so that you can realise your dreams and goals.

Here are three carefully-selected financial priorities to consider, tailored to the age you are now.

What to consider in your 20s

Many people in their twenties are stepping into their first jobs, coping with high rental costs and burdened with student debt. Although there are many demands on your purse at this age, taking these three steps now will pay dividends later on.

1. Open a ‘rainy day’ account

We know it is hard to find spare cash to put away, but without a sum of money to fall back on when you need to find a deposit for a new apartment or to pay for car repairs, your working lifestyle could be in jeopardy. (Editor’s note: you may like to read the How much should I save each month? article for more information.)

2. Build your credit record

If you want to get onto the property ladder, or even be accepted for a mobile phone contract, you will need a good credit score. To keep yours high, ensure you pay off all your bills as quickly as possible (setting up a direct debit for each one is the best way to ensure you don’t miss one) and ensure you register to vote. (Editor’s note: our How to improve your credit score article contains lots more tips on keeping your credit score in check.)

Lenders also often want to see evidence that you have used credit responsibly in the past, so it may be worth getting a credit card and ensuring that you pay off the balance every month.

3. Pay into a pension

Retirement seems a long way away, but the earlier you start saving into a pension, the easier it will be to build up a decent pot. If you are in a regular job, pension saving is an even better deal, since your employer will contribute to your savings as well. (Editor’s note: our Virgin Money Living Saving for retirement section has plenty of articles and videos to help you understand the available options.)

What to consider in your 30s

Finances are squeezed in your 30s as many people struggle to buy their first home, or are hit with new costs associated with having a family. However, there are things it’s advisable to make time for, to make sure you’re making the most of your finances both now and as you get older.

1. Be ruthless with outgoings

Most first-time buyers begin their home-owning journey in their thirties  – but this usually requires forward planning and diligent budgeting. You might need to forgo nights out and other luxuries to help build a deposit, while lenders will also scrutinise your bank statements before deciding whether to lend to you.

2. Protect your family

Many people have babies in their thirties, giving them new financial responsibilities. If you haven’t already, now is the time to make a will and consider life insurance or critical illness cover, if you are worried about how your family would cope financially without you.

3. Make time for investments

If you have any spare cash, your thirties is a good decade to get started with investments. Research  shows that, over the long term, investments tend to outperform cash savings over long periods – so using your ISA allowance and tucking away some money in funds or shares could prepare you for the future. (Editor’s note: the Investing in the stock market section of our website has plenty of articles and videos to help you get started.)

What to consider in your 40s

Earning potential typically peaks in your forties, though family situations can leave you feeling less than flush. Now’s the time to take stock and ensure your money is working as hard as possible.

1. Increase your pension contributions

Putting money away for retirement in your forties will still give your contributions plenty of time to grow, so check whether your pension contributions have kept pace with wage growth, and increase them if not. (Editor’s note: check out the Saving for retirement section of our website for a range of articles and videos to help you.)

2. Check your mortgage rate

If you’ve been paying down your mortgage for several years, you might be eligible for a better deal. 

3. Blitz outstanding debt

Getting into debt is bad at any age, but if you’re still amassing credit card bills and loans in your forties you risk never getting on top of the problem. One in five people retire in debt , making financial planning really difficult, and you do not want to be one of them. It is time to be honest about the issue and prioritise paying off outstanding debts, starting with those on the highest interest rates. (Editor’s note: if you would benefit from support with managing your debts, see our Virgin Money Living article Where can I get help with debt?)

What to consider in your 50s

Retirement may be a way off, but that doesn’t mean you should ignore it altogether in your fifties. This is the decade to take a hard look at finances and circumstances for the future.

1. Get a state pension forecast

The state pension forms the backbone of most retirement plans. The amount you will receive for your state pension will depend on how long you have worked and paid National Insurance for, although you can also receive qualifying years by caring for young children at home. 

2. Assess your investment mix

As you come closer to needing to use your investments in retirement, it may be sensible to review to change the risk levels on your funds or shares. Taking greater risk with your investment is more appropriate when you aren’t planning to use the money for a long time, but as you move towards retirement it may be wise to move some of your investments into lower risk funds. See a financial adviser if you are unsure or need help with this. (Editor’s note: the Investing in the stock market section of our website has plenty of articles and videos you may find useful.)

3. Futureproof your property

Many people in their fifties face the prospect of being ‘empty nesters’, as children leave for university. Use this time to assess whether the property you have will still be the right place for you in the future. If not, you could consider downsizing to release cash, or make improvements to ensure that your home remains the right place for you.

What to consider in your 60s

With state pension age rising inexorably, most of us will still be working in our sixties, though many of us may be hoping to move to a more part-time status. It’s a good time to think about what you’d like to do when you have a little more time, and how you might pay for it.

1. Change your income mix

If all of your income is still coming from salary, but you’d like to work part-time, you might consider taking some income from savings and investments to make up the shortfall. If you are going to do this, ensure you understand the future implications for your finances.

2. Talk to pension experts

New pension reforms mean that many of us have more choices over how we spend our pensions when we retire than ever before. However, with those choices comes responsibility over our spending and it is important to plan in advance.

3. Give something away

Many people start to worry about Inheritance Tax (IHT) in their sixties. It’s paid if your estate (your property, money and possessions) is worth over a certain amount. However, if you give money away more than seven years before death then the gift is deemed IHT-free.

This sort of planning isn’t fun to think about, but your family members might benefit from a gift at this time – to help them onto the property ladder or for education – and you could enjoy the fruits of watching them become settled thanks to your generosity. (Editor’s note: the Inheritance tax: what is it and how does it work? article explains tax in more detail.)

What to consider in your 70s

Many of us are likely to have stopped work completely by our seventies, meaning that we are relying on our pensions and savings to live on.

1. Balance sources of income

If you are using new pension freedoms to take your retirement income straight from your pension pot, it is important to keep an eye on how fast you’re using your cash. You may have other sources of income, including savings and even your property, so it is worth understanding the most tax-efficient way to fund your retirement from all of these different sources. A financial adviser may be able to help you balance this appropriately. (Editor’s note: you may also find The 5 key money questions you need to answer when you retire article useful to read.)

2. Consider your will and powers of attorney

If you haven’t updated your will recently, make an appointment with a solicitor to ensure it is relevant and tax-efficient. It’s also sensible to arrange power of attorney so that family members can make decisions on your behalf if you are no longer able to do so.

3. Get all that you are entitled to

There are a variety of benefits from the Government that kick in as you get older, but if you don’t know to claim them you might be missing out. By the time you are in your seventies you will already be eligible for an annual flu jab and free bus travel, and may also be eligible for a benefit called Attendance Allowance if you need care. At 75, you will be eligible for a free television licence – but you must apply for this. The TV Licensing website has information on how to apply for an Over 75 TV Licence.

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.