The biggest money mistakes to avoid in your 20s, 30s, 40s, 50s and 60s

This is the list you wish someone gave you when you moved out on your own for the first time: Key money mistakes to avoid in each decade of your adult life.

In your 20s, avoid these mistakes …

Falling hard into credit card debt. Aside from loan sharks, this is the most costly debt. To avoid accumulating a balance, spend only what you can afford on just one card, and pay it off each month on time. A key benefit to this is that you’ll build a strong credit score over time. Pay attention to spending impulses, and if they come up, wait 24 hours before making the purchase. You may find you no longer want it.

Buying a car you don’t need and renting solo. I get the thrill of independence, but cars and excessive rents are two of the fastest budget killers. Restaurants are a close third. Skip the car if you can and get a roommate to offset housing costs. And cook at home. Not all fun, but necessary.

Not seeing opportunities for growth in your work. It’s probably not the job you wanted, but these first few roles are key to building a strong resume and LinkedIn profile. Put in a solid effort. Get recognized for your work. Learn to build relationships and to network. You won’t have to do this job forever, but it’s the stepping stone to a better job.

In your 30s …

Putting off insurance and writing your will. The younger and healthier you are, the easier and less expensive it is to secure insurance protection for your life, critical illness and disability — your biggest financial risks. Draw up your will at the same time to make it clear what your wishes are, who you want taking care of your kids and/or pets, and what you want done with the things you own. There’s too much at stake in your 30s to leave these things to chance.

Thinking retirement is far away and not worth paying attention to. Did you know your savings efforts are 2.5 to three times as powerful in your 30s as your 40s? That’s right, you can literally save 2.5 to three times less money now as you would need to save in your 40s, and still end up with the exact same size of nest egg in retirement. It’s a no-brainer to put the power of compounding to work now, in your 30s. RRSPs, TFSAs and pension plans through work are your go-to plans to fund.

Skipping making a budget because it’s restrictive. There’s nothing more restrictive than not having any money at all. Thirty-somethings traditionally have some of the biggest life transformations — weddings, babies, first homes — and it’s critical to learn the art of spending what you have, and nothing more, early. It will make or break your ability to make these dreams come true. Don’t fixate on the method. Find a system that works for you and be consistent.

Not opening RESPs for your kids’ future education costs. RESP contributions benefit from the Canada Education Savings Grant, a 20 per cent match of your money up to $500 per year (and $7,200 over the plan’s lifetime). To get the maximum annual match, contribute $2,500 per child per year while they are eligible.

In your 40s …

Going back into debt after working hard in your 30s to pay it off. Rather than succumbing to lifestyle inflation — the earn more/spend more cycle — your 40s are an incredible opportunity to use any excess money for retirement and rainy-day savings. In other words, save more!

Raiding retirement savings for emergencies. The real issues here are not having an emergency fund, and maxing yourself out. To avoid raiding your retirement savings, build up that emergency savings to cover three to six months of essential costs, and keep your lines of credit and credit cards as clear as possible.

Not hiring a financial adviser. This person will clearly outline what it’s going to take financially to ensure you’re on track for retirement and can still enjoy life today. They can flag opportunities in your cash flow, map out a comprehensive financial plan, and even assist with designing a budget (and process) you’ll love. People with financial plans statistically retire with more money.

Teaching your kids nothing about money. Maybe you’re not a shining example of smart financial choices, but that shouldn’t stop you from sharing what you do know about money with your kids; that credit card balances are costly, that saving and investing much earlier in life is better than waiting, that it’s OK to spend money on things that make you happy as long as you can afford it. These are life skills that are hard to put a price tag on.

In your 50s …

Knowing you’re behind on retirement savings and doing nothing about it. You can catch up on your RRSPs, TFSAs and pension contributions during this decade. It takes ruthless prioritization of your money to come up with the extra savings to go toward retirement, and a crystal-clear investment strategy that exposes your portfolio to age-appropriate risk, in an effort to grow the funds during your remaining working years. Too much investment risk is dangerous in this decade.

Taking on the full burden of college debt for your kids. If paying for your children’s college and university is going to inhibit your ability to retire or put you into debt, think twice about footing the entire bill. Plenty of families share the costs, and some students pay for the whole thing using student loans (the interest can be claimed on taxes) and lines of credit. If the latter situation is your kid’s reality, and you feel guilty about it, consider offering to help them with the loan repayment after they graduate, when you’re in a better financial position.

Living at the same level after a divorce. Divorce is hard enough emotionally and financially, but not adjusting to your new financial reality will make matters worse. Quickly adjust to a new budget, new level of living costs, new expectations around what you can afford for discretionary purchases. Get clear on how the divorce will impact your retirement needs. A rebuild of your financial plan is a must.

In your 60s …

Having no idea where your retirement income streams are coming from. Working with a financial planner or money coach should clear this up quickly. You’ll identify the income sources you can rely on, and ones that might be less consistent. Knowing this information may influence when you take your CPP (the earlier you claim it, the less money you’ll collect monthly, which is why there’s a trend to delay).

Not making a new budget geared for retirement. Your income sources will change from traditional pay cheques to CPP and investment income, as examples. Costs often shift from mortgage payments and downtown parking permits to travel, golf lessons and medical care. As you rebuild your retirement budget, don’t forget to include savings for taxes.

Knee-jerk reactions to market movements. Buying and selling stocks, bonds and funds at precisely the wrong time is extremely damaging to your retirement nest egg. Approach investing with level-headedness. Focus on holding quality assets that produce a steady income stream (that’s key for retirement income), for the long-term.

Overgifting to your adult children. You’ll be in a better position to assist your kids when your own financial house is in order, and when you know the impact to your portfolio and respective income streams. Run the numbers with your financial planner first, then offer a gift you can actually afford, if anything.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.