Here's what I think you should be doing about investing during every decade of your life.
Your (Early-Mid) Twenties
Investing in your 20s? Don’t worry about it. Things are probably hard enough as they are.
It's likely you will have student loans and outstanding debt. You are just getting established in your career, or maybe not even started yet, so you are probably pretty much spending what you take home on rent, bills and loan repayments.
The main thing in your 20s is to not get into any more debt - no store cards, expensive credit cards/loans or huge overdrafts. Do not live beyond your means - once you start doing this it’s a downward spiral and you will find it hard to break this habit as you get older.
Make sure you understand your company pension - keep the access details safe!
Build habits that will help you out for the rest of your life. Monitor what you spend your money on so you can see patterns are emerging. The earlier you start this the better. There are loads of apps to help you do this.
Top tip for your 20s: Try to understand the basics of how the stock market works and also concepts like the impact of inflation on your money and what compound interest is. A little time invested in self-education now will pay dividends (boom boom) as you move in your 30s.
Your (Late Twenties &) Thirties
I like to think of this period as when you start to form good saving habits that will set you up for the next 30 years. If you can get some good savings going on now then you are making the most of compound interest (which you learned all about in your early 20s, yes?)
Get on the savings wagon now. Start putting away whatever you can even. Your aim is 20% of your salary. And before you start hyperventilating, this INCLUDES whatever work contributes to your pension. If you can’t do 20% now then build a plan where you work towards it.
You should be more established in your career so you should be earning more and getting bigger bonuses. Don’t get into the habit of spanking all your bonus on a deposit for a new car or a new watch or whatever your spending kryptonite is. Allocate a certain amount for a treat and then put the rest away.
If you are getting a pay rise then your savings should get a pay rise too. Put 75% of your pay rise away and you can absorb the rest of your pay rise in your monthly disposable income. Remember you need to be aiming for, and getting to, 20% of your income put away for the long-term.
In terms of self-education, you should familiarise yourself with robo-advisers, make sure you are saving in a tax-efficient way and learn about low-cost tracker funds. All these things will keep your savings on track and make investing in the stock-market straightforward for you.
Consider working with a Financial Lifestyle Coach to get your money organised, build disciplined money habits and accelerate your understanding of investing. They will help keep you on track as you work towards your lifestyle goals.
Speaking of life goals - do you know what they are? Do you want a career break, go travelling, start your own business, buy a vineyard in the South of France? You should start planning for this happening in your future, otherwise it will never happen and you'll wander through the next 2 decades. How much money would you need to make this happen? Document it.
Top tip for your 30s: Keep an eye on your pensions - have you moved jobs much over the last 10 years? Make sure you keep pension providers up-to-date with your current contact details and you know how to access your accounts. Make sure your pensions are not put into ‘maintenance mode’ if you do leave a company. You are young enough to tolerate more risk so make the most of this chance.
This is probably your power saving decade where you can really start to save some large sums of money.
By now, you should have developed good savings habits, you should understand how your investments work and how they are performing.
By now you should know what your retirement ‘number’ is and how you are going to get there. Make sure this documented and you check your progress on an annual basis.
You will probably have some very serious responsibilities by now - home owner, partner (or maybe an ex-partner or 2), children, pets, etc. Make sure you have a sufficient Plan B pot for emergencies.
Have you got a good savings plan for your children? It’s possible to build them a £1m legacy if you start putting away a small amount for them on an annual basis over a long period of time. Not only will it help them as they grow older but also means you won’t have to dip into your retirement pot as much when they need help from the Bank of Mom and Dad.
Think carefully before re-mortgaging your house to do extensive work to add that extension - it might mean your revised mortgage repayments now go beyond your dream retirement age.
Top tip for your 40s: Get a will sorted out if you haven’t already. Make sure you are strictly saving whatever is required to hit your retirement goal, as there is still time to tap into the power of compounding, and have an investment portfolio with a relatively higher risk.
Early retirement now becomes a phrase you like the sound of - you might only have 10 years or so left in the job market so make sure you are saving everything you can.
You are now getting closer to your retirement age so it’s important that your investment portfolio is balanced appropriately for this stage in your life. You can’t tolerate as much risk as you could 15-20 years ago so make sure your asset allocation is sensible.
Resist the urge to help your children with house deposits, further education etc if you are not 100% sure you have an adequate pension. Your children can always wait a bit longer to save for a house or they could access student loans - you do not have any extra time to make up for shortfalls in your retirement fund at this stage. If you have been saving for them since they were newborns then you might not need to worry about this anyway!
Top tip for your 50s: Be certain that you are comfortable that you can live on 3-4% of your total pension pot - this might be your last chance to really accelerate your savings. And make sure you are crystal clear around your retirement numbers - what you need, what you have, what you need to put away to hit your goal.
You are probably going to retire during this decade but retirement planning doesn’t stop. You will remain an investor in the stock market throughout this decade and beyond.
You need to protect what you have in your pension pot so do not undertake any unnecessary risk. Your asset allocation might need to be adjusted towards cash and bonds at this stage.
Make sure understand what you will spending your money on in retirement so there will be no surprises. Have you got adequate health care coverage for example? Will you be downsizing your house and therefore have house purchase costs to consider?
Top tip for your 60s: Consider a part-time job or a side business if you still want to generate some additional money for yourself.
Your Seventies (and beyond)
Keep an eye on your money. You still need to be fully engaged with your finances. If your living costs start to drop and you have surplus cash that you will never need, then start considering how to pass your wealth on to the next generation.
If there anything you wish you had done at a specific time in your life that you didn't? What advice would you like to share with people just started to build long-term savings?