Financial advice has a way of sounding simple: Save this percentage. Keep that much in the bank. Pay off this debt before you do anything else.
But real life rarely follows a neat spreadsheet.
That’s why Patrick Payne, clinical associate professor in the Department of Finance at Arizona State University’s W. P. Carey School of Business, thinks people should focus less on one-size-fits-all rules and more on the financial “job” their money needs to do at each stage of life.
Timed for Financial Planning Month in October, ASU News spoke with Payne about how those jobs change by decade, from your 20s to your 50s.
Payne’s advice is practical, but also reassuring. Feeling stretched in your 20s does not mean you are failing. Pausing to make a plan in your 40s is not too late. And even people who have made mistakes or started saving later than they hoped still have options that can meaningfully improve their future.
The key, Payne says, is knowing what matters most right now, then making financial decisions that support the life you are actually trying to build.
Note: Answers have been edited for length and/or clarity.
Question: Financial advice is often presented as universal, but priorities change with age and circumstances. What should people understand about the financial “job” of each decade?
Answer: Most financial advice comes as rules: Save 10%, keep six months of expenses in the bank, pay off your house before you retire. Rules are popular because they’re simple, but they’re written for an average person, and I’ve never met a rule without an exception. So, any advice I give here should be considered based on principle so it can be adapted personally.
- In your 20s, the job is building habits.
- In your 30s, it’s protecting what you’re building and focusing on long-term goals.
- Your 40s are for taking an honest look at whether the plan is working and hitting the gas on your retirement savings.
- Your 50s are about turning savings into a future paycheck.
These ages are loose. If you had kids at 42 or went back to school at 35, your timeline shifted, and that’s fine. Everyone’s path through life is unique. The question underneath stays the same: What’s the most important job my money has right now?
Q: In their 20s, many people are balancing entry-level salaries, student loans, high housing costs and the pressure to start investing. How should they prioritize emergency savings, debt repayment and retirement contributions?
A: Your 20s are when your income is lowest and your expenses feel most unfair, so feeling stretched is normal. It doesn’t mean you’re failing.
I’d start with building a small cushion, about one month of essential expenses, so a flat tire doesn’t turn into a credit card balance. Next, if your employer matches retirement contributions, contribute enough to get the full match. After that, pay down high-interest debt like credit cards if you have any, because very few investments will reliably beat a 22% interest rate. Then build your emergency fund to about three months and start increasing retirement savings.
Student loans need more nuance than people expect. If you have federal loans at a moderate rate, you usually don’t need to attack them aggressively. Make your payments, use income-driven options if money is tight, and keep investing.
Honestly, the biggest lever in your 20s is housing. People obsess over coffee, but one roommate or a slightly less trendy neighborhood can free up hundreds of dollars a month. And automate everything you can. Start with 5% if that’s what you can do, then bump it up a percentage point every time you get a raise. You’ll barely feel it.
Q: The 30s often bring competing goals such as buying a home, raising children and advancing a career. What framework can help people decide where their next dollar should go?
A: The framework I teach starts with a vision: What do you want your life to look like in 10 or 20 years? Once you know that, I have people finish three sentences:
- “I will ensure that I …” covers your non-negotiables.
- “I will limit spending on …” covers things that matter, just less.
- “I will sacrifice …” covers what you’re willing to give up.
When a new expense comes along, you check it against those answers instead of agonizing over it. You’ve already made the hard decision.
For the next dollar, I’d protect what you’re building first. That means an emergency fund and, once someone depends on your income, term life insurance and disability insurance. Then keep getting the employer match, even while you’re saving for a house or paying for daycare. People who pause retirement savings “just for a year” usually pause it for much longer.
Q: By their 40s, people may be paying a mortgage, saving for college, supporting aging parents and wondering whether they are behind on retirement. What financial checkup should they conduct, and which warning signs require immediate attention?
A: Your 40s are a great time for an honest look in the mirror. You have enough history to see what your plan is actually doing and still plenty of time to change course.
I’d start with net worth, which is everything you own minus everything you owe. The direction it’s moving tells you more than the number itself. Then look at your savings rate. I like to see about 20% of income going toward future goals, including debt payoff, savings and retirement. After that, check your investment fees, your insurance and your estate documents. Make sure your beneficiary designations are current, because those forms override your will, and I’ve seen ex-spouses inherit retirement accounts because nobody updated a form.
The warning signs I’d act on right away are carrying a credit card balance month after month, having no emergency fund or one you keep draining, borrowing from your 401(k) and going more than a year without retirement contributions. I’d also act if you’re supporting parents or adult kids in a way that has stopped your own saving, or if people depend on you and you have no will or life insurance.
Q: What should become the central financial priorities in one’s 50s, particularly regarding retirement income, debt, health care costs, catch-up contributions and Social Security planning?
A: I’d start by splitting future spending into two groups: essentials — like housing, food and insurance — and everything else — like travel and hobbies. Then try to cover the essentials with reliable income such as Social Security, a pension or possibly an annuity. I call that an income floor. Once the floor is in place, your investments pay for the fun stuff, and a bad year in the market becomes an inconvenience instead of a crisis.
For debt, try to enter retirement without credit cards or car loans. Paying off the mortgage is more of a judgment call, but lower fixed expenses mean you need less income, and that makes everything easier. For health care, if you plan to retire before Medicare starts at 65, you need a plan to cover insurance in the meantime. If you have access to a Health Savings Account, it’s one of the best tools out there — the money goes in tax-deductible, grows tax-free and comes out tax-free for medical costs.
Social Security deserves real attention. Log in at ssa.gov and look at your estimate. Claiming at 62 permanently cuts your benefit by about 30% compared with your full retirement age, and each year you wait past full retirement age adds roughly 8% to your benefit, up to age 70. Social Security is basically an inflation-adjusted annuity that lasts as long as you do, so waiting is one of the cheapest ways to protect yourself against a long life. That matters even more for married couples, because the higher earner’s benefit becomes the survivor’s benefit.
Q: For someone who has postponed saving or made financial mistakes in an earlier decade, what steps can produce the greatest improvement now — and what should people avoid doing out of panic?
A: The biggest improvement usually comes from raising your savings rate. At this point, how much you put in matters more than which funds you pick. Going from saving 6% of your income to 15% will beat any clever investment strategy. Look hard at your big fixed costs, like housing, cars and insurance. Working two or three extra years is also powerful because it helps in three ways at once: you contribute longer, your savings cover fewer years and your Social Security check grows.
What I’d avoid is anything driven by panic. Feeling behind makes people easy targets for crypto tips, options trading and “can’t miss” opportunities, and a late start is a bad time to add risk you don’t understand. Don’t cash out retirement accounts to pay off debt, because you’ll pay taxes and penalties, and without a spending plan, the debt tends to come back.
Finally, don’t give up. Some people feel so far behind that they decide there’s no point. A dollar saved at 55 still has decades to grow, since retirement itself can last 25 or 30 years. There’s always something you can do to make your future better.
Source: news.asu.edu
