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Smart financial moves right now for any age

The best way to think about your money is to take into consideration how old you are. Jean Chatzky ‘Today’ financial editor gives shares some tips.
/ Source: TODAY

On “Today’s Money,” we wonder what’s the smartest financial move you could make? Actually, that’s a trick question. Because it all depends on how old you are. And our financial concerns shift over time. “Today” financial editor Jean Chatzky was invited on the show to share some advice for financial planning for the different stages in our life. Here are her tips.

Planning for the future depends on where you are in your financial life, which means it’s largely a function of your age. The people who are the smartest about their money recognize that different things take priority depending on your stage in life. 

Save whatever you can
The money you save in your 20s — simply because it has more time to grow — is so much more valuable than money you save in any later decade. So, even if it's not a lot, start saving. Your goal should be to put aside an emergency cushion of 3 to 6 months worth of living expenses that could bail you out if you're unable to work for any reason. And, if you work for a company that has a 401(k) — particularly one that matches contributions — sign up and start participating.

Avoid more debt
You may well feel that all that student loan debt you took on to get through college means you'll be saddled with debt forever. So why not load up the credit cards? It's a lost cause anyway. Wrong! Student loan debt, as debt goes, is relatively inexpensive. Hopefully, you consolidated yours to a point where the rate is as low as possible. Then don't rush to pay it off — just pay it off over time. Credit card debt, however, can be very expensive. Loading yourself up in your 20s with credit card debt as you attempt to live on (a little or a lot) more than you're earning stands in the way of reaching the rest of your financial goals: saving, investing, buying a house and generally getting ahead.

Fund retirement account
Hopefully you joined your company's 401(k) or other retirement plan in your 20s. If you did not, or if you're not maxxing out your contributions, now is the time. If you don't have a plan at work, kick as much as you're allowed ($4,000 right now) into a Roth IRA or Traditional IRA. If you work for yourself, you can put even more — more than $40,000 a year, depending on your income — into a SEP IRA, an Individual 401K or a Keogh. Do it! If you don't work but are married, you are allowed to make contributions to a retirement account as well — and you should!

Budget wisely
Your 30s are a big decade of acquisition. You want to get married and take a honeymoon. You want to buy a house and furnish it. Buy a car. You may want to have a baby or three.  All of these big life changes can throw your budget for a loop — particularly if one or both of you changes careers along the way. It's important to keep yourself on track by looking at home much you have coming in and how much you have going out (and where that money is going).  It is all too easy to slide into the nether world of being cash-flow negative.  And once you enter that territory, it's hard to recover. So try to figure out how much you want to spend on each line item: My recommendation 35 percent housing; 15 percent transportation; 15 percent debt repayment; 10 percent saving; 25 percent "other" i.e. the cost of life. Then figure out how you're going to alter your behavior to fill those buckets in a responsible way.

Maximize earnings
These are your peak earnings years. You want to make sure you're using them to your advantage. If you feel you're underemployed — or if you just haven't gotten a raise in some time — now is the time to gauge your worth on the open market (use search engines at and and negotiate for what you're worth. 

Focus investments
Make sure that you're not only maxxing out on how much you invest, but that your investments are working for you in the best way possible — if you've seen over the years, that you don't have the stomach to actively manage your own investments and to rebalance your retirement accounts, that's okay. Just be sure you either hire someone to do it for you, or put the money — within your retirement accounts — into life cycle or target date retirement funds that will be the most aggressive when you're relatively young and earning a lot, and less aggressive as you get closer to retirement. Finally, look at your home. I know financial experts quibble on whether a home is a liability or an investment. You want to be aiming to be mortgage free when you retire. So if you can swing an extra mortgage payment once a year, do it and understand it'll reduce the term of a 30-year-mortgage to 23 years.

Protect your family
You don't want — at any time — to be in jeopardy of losing this financial life you've built. That means, you need to have a will in place and have named guardians for small children. You need to have life insurance if you have dependents. If you're the only wage earner — for yourself or a family — you need disability insurance as well.

Use catch-up opportunities
Once you hit age 50, you have the ability to sock away more for retirement than people younger than you, according to the tax code. You can put an extra $5,000 into a 401(k) and an extra $1000 into an IRA. If you're feeling underfunded, make sure you take advantage of these opportunities. 

Put retirement before college
I've said it many times on this show, you don't want to sabotage your own retirement savings to get a jump on saving for college for your kids.  But if you are maxing out for retirement, now is the time to start putting at least some money into college savings plans. A great alternative for both is the Roth IRA which allows you to withdraw funds for both college and retirement.

Evaluate retirement options
More and more people are redefining the notion of their own retirement these days. You need to go through the exercise of deciding how you want to live and how much that's going to cost you — and you need to address the question of whether or not you'll work, at least part time.  Many people do so in an attempt to extend their health benefits, and if not, to assuage their potential boredom.

Form withdrawal strategy
Once you know how much this life of yours will cost, take a look at how much you'll have coming in from social security and pensions. Then you can figure out how best to withdraw money from your retirement accounts. You can start withdrawing at age 59 1/2. You don't have to withdraw until more than a decade later. If you can leave the money in a little longer, that gives it a greater opportunity to grow. But understand, this is not something you should approach haphazardly.  ou need as much of a strategy for pulling money out as you did putting it in.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .