Essential money advice for every stage of life

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I was raised frugally, and the money lessons I learned growing up have served me well. Even when I went through a period of unemployment, I managed to set aside a small amount of savings and remain debt-free. It was extremely helpful that I never carried student loan debt, which put me in a better position than nearly half of other millennials who carry around $40,000 in student loan debt on average. Though I think I’ve been decently smart about money (not living outside my means and making sure I always had a safety net), I know there’s a lot more I could have been doing to maximize my earnings. Now that I’m cresting the hill of middle age, I look back and wish I would have spent some time learning about investing. But I’m still in the thick of life, and money matters just get more complicated. Like many, I think about how I can save for my retirement and my kids’ college education and the possibility of elder care.One person who has thought about all these important money questions is personal finance writer Emily Guy Birken. Here are a few pieces of her advice for some of life’s biggest milestones:

Saving money starting with your first job

Everyone knows that they should save part of their paycheck, but it can be hard to set aside even a tiny bit of a puny entry-level salary. Guy Birken advises that rather than trying to have the discipline of saving part of your paycheck, it’s smart to set up recurring automated investments. “It’s much easier to make a single decision to set money aside than make repeated decisions about your finances with every pay cycle,” she writes. “An automatic investment that coincides with each direct deposit of your salary means you’ll never miss the invested money.”

Paying off debt early in your marriage

When you get married, you take on the other person’s assets and debt. Guy Birkin points out that a recent survey of divorced people found that nearly 20% cited debt as a contributing factor to their divorce. All the more reason to work together to pay off any high-interest debt early in your marriage.

To figure out how much money to put toward paying off debt, she recommends using the 6% rule to help you determine which debts to prioritize.

“This rule suggests that you focus on paying off any debt with an interest rate higher than 6% before sending additional funds to your investments. That’s because the historical rate of return for the market as a whole hovers at around 7% per year after factoring in inflation. That means any debts with a 6% or higher interest rate will offer approximately the same or higher ‘return on investment’ as traditional investing,” Guy Birkin says.

Create a will when you become a parent

Nothing makes you think about mortality as much as having a kid (or maybe that’s just me). But when you become responsible for another human’s life, it’s crucial to make sure they will be provided for, no matter what. Making a will might sound complicated, and Guy Birkin advises that anyone with a large estate or a complicated family situation should consult with a lawyer, but most new parents can get away with using a reputable online will service. “These services walk you through the process of writing your will and give you instructions on how to get your will witnessed and notarized,” she says.

The process isn’t too complicated. But Guy Birkin says that as your children and your assets grow (or if you have more kids after having first created your will), you should plan on revisiting your will at least every five years.

Think annual income, not nest egg, when retirement planning

Not having enough money to retire is a common money worry. But Guy Birkin says most of us think about retirement savings the wrong way. We think of how big a nest egg we’ll need to retire. The problem with that approach, she says, is that no one knows when they’ll die, so no one knows how many years’ worth of money they’ll need.

She suggests a mindset shift to think instead about how much annual income you’ll need in retirement to maintain your lifestyle. “A more dynamic retirement plan is focused on ensuring annual retirement income—meaning you have multiple income streams, such as tax-advantaged retirement accounts, taxable investments, annuities, Social Security, etc.”