How budgeting changes depending on age

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No matter what your age, money always seems to be one topic most people struggle with, unless of course finance happens to be your forte. ​​​​For the rest of us, however, knowing how to handle your money isn’t exactly something that comes naturally. We know what needs to be allotted for bills and the necessities, but what about savings and investing?

Furthermore, while you may have the process figured out in your 20s, you’ll find that come 30 or middle-age, your budget and the things you need to include within it will drastically change. As you grow and your life changes throughout the years, so do the things you’re financially responsible for.

And once you’ve saved up enough to buy what’s important to you in your twenties, you’ll find that your financial goals change with age as well. That being said, without hiring a financial coach, how do you know what to budget for from decade to decade as you age?

Here are some basic guidelines for adjusting your budget as you age so you can afford each stage of life and prepare ahead of time.

Budgeting in Your 20s
For many, your twenties involve that epic moment when you graduate from college and finally enter into the real adult world and job market. Of course, if school was a path you took, your twenties most likely has a lot of debt as well. It makes sense that the biggest budgetary consideration during this decade is to begin hacking away at that debt you’ve accumulated.

Your budget in your twenties should have three essential categories: necessities (which should include a category for your debt), savings, and extracurricular money.

Your first step should be to create a mini-emergency savings fund. Life is unexpected, and if you happen to lose your job, get in an accident, or have your car break down, you’ll be thankful for your extra cushion. After that and after paying any and all bills you have, including debt, as well groceries, you should use a portion of your monthly income for other savings. Anything left over can be used for fun activities. Now is also a great time to set up a retirement account in the form of a 401k or IRA, since the sooner you get started, the better off you’ll be in the end.

Budgeting in Your 30s
Your thirties bring about a whole slew of new factors you must consider for your budget. For starters, you may still be in the process of paying down your debt. If that’s the case, you’ll want to factor any debt you have left into your budget, and maybe even make debt freedom one of your financial goals for the decade.

A lot of people also decide to settle down in their 30s. The idea of buying a house might enter the picture, as well as the possibility of children. Apart from the basic items you always have to budget for, now is the time when you may want to include saving for a down payment in your list of financial goals. Or, if you have kids or are considering having kids, now is the prime time to begin saving for a multitude of things. For example, there’s always the possibility of child care, braces, purchasing a car for them someday or, the most important of all, college tuition for your now, or future, children.

Three generations of men on the couch, Johannesburg, South Africa

Budgeting in Middle Age
The top priority for your forties and fifties is savings and retirement funds.

It’s imperative that you know how much you need to save for retirement. Make sure you’ve taken care of any high-interest debt, and focus on saving as much as you can for retirement and keeping your emergency fund topped off.

Moreover, be sure to check on any college savings you may have for your children to ensure that everything is as it should be. If not, you may need to adjust your budget to accommodate further costs as well.

Another important budget category should be your investments. Middle age tends to be the years when you earn the most off of your previous investments and it usually serves as good padding for you nest egg, which is important come retirement. Your fifties are also a time to think about saving for a long-term care plan in case you or your spouse need one in the future.

You could consider splurging a little since you’ll still be bringing in a steady income. As long as your debts are paid, now may be the time to budget for some fun activities. Come retirement, you’ll be living off a set income, which may give you less leeway in the future.

Budgeting for Retirement
Your sixties and every age after is not the time to take risk. Now is the time to budget in correlation to what you want your retirement to look like. That being said, still budget for investments, but be sure they’re low-risk investments and put away what you can into a retirement fund. Again, budgeting with consideration for long-term-care can be imperative for the future.

Your goal now is to plan for the near future. Consider how your budget will adjust when you retire, and think about how you’ll need to budget for bills in relation to the retirement fund you have set up. Figuring out how to budget at any age can be difficult, and when you consider the array of things you have to save for in the future, it can be a little daunting. However, if you figure out your timeline and have a plan, as with most things in life, you’ll find that it can be easier than you think.

Just as your life will adjust and grow as you age, so should your budget. It’s important to make the right adjustments accordingly. By doing so, come every stage of life, you’ll find yourself prepared and properly equipped for whatever is thrown at you. Moreover, come retirement, you’ll be elated when you can head into a much-deserved stage of life without worrying about whether or not you saved enough.

Have you thought about how your budget will change with age? What are some adjustments you’ve already had to make?

The post How budgeting changes depending on age first appeared on Everything Finance

RELATED: 11 budgeting skills everyone should master

1. See Money as a Tool

We tend to think of money in a lot of different ways. Money can be freedom, it can be despair, it can mean power or significance, or any one of a number of things. The point is, to be good at budgeting, develop the mindset that money is a tool. It helps you do the things that you want and need to do. No matter how much or how little you have, your money can help you achieve your goals.

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2. Record Your Transactions

On a practical level, you will need a record of your transactions to start a budget, and you will need to keep recording them to continue budgeting. You can do this by hand, via an app, or once a week on a spreadsheet. Do it however works for you, but learn to record your transactions and you will be well on your way to budgeting.

Photo credit: Valueline

3. Assess Your Spending

Recording your transactions won’t help if you never think about them. Learn to categorize your transactions in whatever way is meaningful for you, so you can see how much you’re spending in different areas. This can help you decide where to spend more, where to spend less, and what cutting back might look like in your everyday life.

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4. Make a Budget

This might be the most obvious skill in this list, but it’s also one of the most important. There are spreadsheets you can download, programs like YNAB and Mint that help you see your spending in different ways, and more. Some things to think about before you choose a method involve deciding whether you want to go old school or online, and whether you want to store it on your personal computer or in the cloud.

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5. Write It Out

Throughout the budgeting and recording process, it will help if you actually write things out. This can be on a computer, though there is something about the act of writing something and then seeing it there in your own handwriting that helps you remember. Whatever you do, don’t keep your budget in your head. It’s easy for numbers to become fuzzy and for you to forget about your budget entirely. Instead, put your budget where you can see it often, so that it feels real and you remember your goals.

Photo credit: Getty

6. Plan Ahead

When you make your budget, don’t just think about what you need right now, or even your monthly expenses. Think, too, about expenses that only come around every so often. Car insurance, life insurance, and property taxes are a few line items that can fall into these categories. Then, save a little bit of money every month toward these items, so you can pay them without worry when that bill shows up.

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7. Include Spending Money

If you don’t have spending money, you will feel like your budget is a cage you need to break out of, rather than a structure supporting you and your goals. Even if all you can afford is $5, give yourself something. This can go against the grain, especially if you have a lot of debt or very little income. However, you are important. And you will be happier keeping your budget if you know you have a little money you can spend however you want.

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8. Make a System That Works for You

It’s easy to get sucked into a system that doesn’t work for you. For instance, you may not be able to track your spending every day. If that’s you, then don’t buy into a budgeting system that requires this. There are plenty of systems where you can record once a week, or so. If the system doesn’t work for you, you won’t do it, and there won’t be any value to budgeting. Keep trying things until you find something you like.

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9. Live With Discipline

This is a huge skill and one that won’t happen overnight. Living a disciplined life, though, will go far toward helping you make and keep your budget. Pay attention to your budget. Update it. And when you don’t have any money left for something, stop spending! It can help to breathe through your desires, to remind yourself of your bigger goals, and to give yourself a waiting period before you buy things.

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10. Know When to Splurge

This is a tricky skill, especially in light of the one above. However, there are times in every life when it’s right to splurge. This doesn’t have to be a huge spending binge — it can be something as small as a coffee with a friend. A lot of times, this comes into play when you choose to buy something of a higher quality even though it costs more. It’s up to you to decide when to splurge, but make sure there’s some room for it in your financial life.

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11. Ask Yourself Hard Questions

When you’re budgeting alone or you are the one in charge of the budget, it can be easy to let things slide. Get into the habit of asking yourself hard questions, like, “Why do I always spend too much on entertainment?” and “Am I realistically able to take that vacation this year?” You may not like the answers you find, but being honest with yourself will ultimately help you become more aware of who you are and how things work inside of you — which will help you meet your goals, financial and otherwise.

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