The 7 Worst Money Trends (By AGE!)

22:49And so making sure that you think about that is really important. Also, Americans in their 30s take more discretionary trips per year than any other decade of their life. Now, one thing I want you to note is that if you have young kids or if you have kids in your life, you only get so much time with them. And so I have no problem with you spending money on vacations and things that you value just like that. But making sure you also hit your retirement goals at the same time is very, very important. And so you got to hit your retirement goals. Then you can do whatever you want after that. That is the key component here, making sure that we are first hitting those retirement goals, especially in our 30s when the time is now ticking.

23:25Number three, and this is a disturbing trend that I am seeing across the board, is delaying investing until things calm down. Now, this is something where two-thirds of people in their 30s actually aren't on track for retirement, according to Charles Schwab. And so we want to make sure that we help change this metric and help change this number. If you wait until age 35 to start instead of starting at age 30, this can cost you over a half a million dollars if you are investing over that time frame. And 45 % of people who are in their 30s say that life is just too busy, and that is the reason why they haven't started investing.

23:59And so there's a number of different things to say on this. But number one, the biggest key component overall is to make sure that you are investing. Then once you do that, automating your investing means that you don't have to worry about investing whatsoever. And so when you learn to automate your money, you don't have to spend a ton of time investing. It's just going to automatically happen every single month. You don't want to have any more delays. You got to buckle down and get started today because the longer you wait, the harder it gets. And so I want every single person to get started investing as soon as they possibly can.

24:28So number four is not protecting your income. So a lot of folks in their 30s, they have more people who depend on them. Maybe you are married, maybe you have kids. And if you don't protect your income, that is one of the most important things that you can do. One in four people will suffer a disability lasting longer than 90 days. Yet only 14 % of millennials actually have disability insurance. And nearly 60 % of families with kids have no life insurance or little to no coverage. And so this is something where you need to learn and how to protect yourself. If your family would go through a hardship if they lost your income, then disability insurance is something that you need to look into and you need to do some additional research.

25:05Now, making sure you do your research and understanding how this works is very, very important. One accident or illness could derail your entire financial life. So you have two options. You can have disability insurance and pair that with an emergency fund and or you can have a larger emergency fund without having to pay for disability insurance. But both of those are really, really important to think through. Insurance is not exciting, but it is one of those things we have to talk about. Secondly is life insurance. So going out and getting term life insurance is by far the cheapest option. You can get up to a million bucks policy for right around 35, 40 bucks with Policy Genius.

25:37And so that is a great way to just make sure you are protected. If somebody depends on your income, you need to have term life insurance. And the way that term life insurance works is that it works for a specific term. So let's say you're 35 and you wanna buy a policy from 35 to 59. Well, if you wanted to do that, you would have that policy for those 24 years over that timeframe. And then after that, the goal is to make sure that you have enough in retirement so you don't need that term life insurance policy anymore. So that's why it's so cheap because it only lasts for a certain term and it gives you coverage if anything were to happen to you.

26:08My wife and I just increased our life insurance policies this year. It was one of the big things that we wanted to do because we had another child. And so we made the adjustment to increase those life insurance policies through Policy Genius. This is something that you must do, especially if you have people who depend on your income. Number five is letting kids' costs explode without any boundaries whatsoever. So the cost to raise a child has gone up to$20 ,000 per year, according to Bankrate. And youth sports alone, as we have talked about, are ranging on average from$3 ,000 per year. But there are some folks out there who are spending$10 ,000 plus on youth sports and has gotten completely out of control.

26:45And 72 % of parents say they overspend on child activities, and that is the reason why they're not saving for retirement. So let me give you a couple of examples here. Number one is you need to make sure that your retirement comes before some of these child activities. And so if you're overspending, if you're one of those folks who are spending$10 ,000 per year, but you're not saving for retirement, you have your priorities all completely mixed up. Because as time goes on, the memories of those child sports activities are going to fade. But what's going to happen is you're not going to have any money in retirement and your kids are going to have to take care of you.

27:17That is not a situation that you want to be in whatsoever. And so understanding how to make some of these adjustments is very, very important. So if it is discretionary spending, things outside of daycare and stuff like that, if it's discretionary spending, just make sure you have it under control. You know how much you're spending every single year, because if you do overspend in these categories, but you don't save for retirement, which I know way too many people that do this, it is going to be a long-term problem. Number six, and this is a big one, staying in underpaid jobs instead of growing your income.

27:44So your peak earning growth years are your 30s and 40s. And you want to make sure that you can earn as much as you possibly can. And switching jobs typically on average results in an 8 % to 13 % increase in your wages. And often most people who stay in the same exact job usually get anywhere between a 2 % to 4 % raise. And so being loyal to your company doesn't always pay off. You've got to make sure that you are thinking about your income if you are at the right income for your specific job. Now millennials stay in jobs longer than Gen Z. I think Gen Z is more used to switching jobs where millennials stay a little more loyal than Gen Z does.

28:21And people who change companies every two to three years earn 50 % more per decade on average. Think about that for a second. So loyalty is not helping you whatsoever. And people who change every two to three years earn 50 % more per decade. That is a massive, massive number because your earning power is one of the most important levers that you have to pull. And when you look at this, you're going to see a dramatic impact on your long-term wealth building, depending on how much money you make. Think about this for a second. If you make$50 ,000 per year, and then over the course of the next decade, now you make$75 ,000 per year, but you still live on that$50 ,000 per year, you have$25 ,000 per year that you could put towards investments in wealth building.

29:02Now, this is very powerful and is going to allow you long-term to absolutely change your financial trajectory. And so I really want you to understand that your income is the catalyst to help you build wealth. You can only cut back so much, but you can grow your income exponentially. And so when you do this, this is going to help you reach all of your financial goals. So focus on your income, focus on growing your income. That is the key. Don't stay loyal to companies if they're not willing to pay you more. Now, if they are willing to pay you more, that's fantastic. But if they're not, make sure that you are looking for other options.

29:32And the number seven is overspending on the big three. So a lot of folks in their 30s, they're overspending on homes, they're overspending on cars, and they're overspending on food. And those are the three areas eating out those types of things. And those are the three areas that if you can control those three expenses, and you can control housing, transportation, and food, that will be the big, big difference maker for most people. Because once you do that, if you control those three, you'll be able to spend a lot more in other areas. So folks in your 30s, make sure you're focusing on these. I know it is very difficult in your 30s.

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32:23We've got a lot planned this summer. Trips with kids, time outside, long weekends, and just more moments together as a family. And honestly, the older I get, the more I realize how important it is to protect it all. The good news is getting life insurance doesn't have to be this huge, stressful project anymore. That's why I like PolicyGenius. PolicyGenius isn't an insurance company. They're an online marketplace that helps you compare life insurance quotes from top insurers side by side for free. And their licensed team helps you figure out the right coverage, answers your questions, handles the paperwork, and helps you find the best fit for your family.

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35:06All right, so let's look at the trends for your 40s. Number one is massive lifestyle inflation. So household spending actually peaks between age 45 to 54. And people in their 40s increase their spending about 20 to 40 % than they did in their 30s. And this can be a number of different reasons, but only 44 % of Americans in their 40s say they could cover a$1 ,000 emergency fund. And so higher income levels often leads to higher inflation costs. So as your income rises, a lot of people are also increasing how much they are spending every single year. And so because of this, this is called lifestyle inflation.

35:41And so what you wanna do is try to control this lifestyle inflation and be very conscious when you go and think about increasing spending. If you get a raise or a bonus, make sure you're using the 50-50 rule, meaning spending 50 % on things that you actually value and then saving 50%. This is going to help reduce lifestyle inflation and make sure you have extra dollars going towards wealth building. Number two is not catching up on retirement savings. So the median retirement balance for people in their 40s is$89 ,000. Now this is according to Fidelity and that is not even remotely close enough to where you need to be in your forties.

36:14But by 40, most experts suggest you should have two to three times your salary saved. And so starting to catch up at 45 requires two to three times the monthly investment compared to at age 32. And so for most people in their forties, I want you to understand this right now. It is never too late to get started investing, but you have to get started right now. Now, even if you've fallen somewhat behind, you can still catch up. Your 40s are a prime time to set up the runway for retirement so that you can get to your 50s, save aggressively, and then retire in your 50s or 60s. And so if you are someone in your 40s, it is never too late.

36:49You can increase your savings rate, but you have to be intentional about where you're spending your dollars and you have to increase that savings rate over that timeframe. Number three is ignoring tax planning. So less than 20 % of people in their 40s use HSAs or health savings accounts, despite them being the most tax efficient account in America. So obviously some people can't utilize them because they don't have a high deductible health plan, but they are really great retirement accounts and only 3 % of eligible households attempt Roth conversions. Plus the average investor pays$1 ,700 a year more in taxes than necessary simply due to poor account selection.

37:25And so understanding the role of retirement accounts when it comes to tax planning is really, really important. Because once you choose the right accounts, that will absolutely change your long-term trajectory and your tax situation. So understanding those accounts and understanding which ones to invest in is really, really important, especially in your 40s. Now, number four is ignoring health until it becomes a financial crisis. Now, this is something where health problems begin to rise at age 45. And so we want to make sure we are taking care of our health as early as possible. Why? Healthcare costs are a massive, massive thing that are going to be rising every single year.

37:58In fact, the average inflation rate in healthcare has been 7 % over the course of the last five years. And so we want to make sure that we are taking care of our health because this is going to be a huge cost down the line. Poor health can become expensive fast. So making sure you're getting your exercise in every single week, making sure your diet is dialing in. Those are all very important to make sure that you're optimizing your health strategy. Number five is funding kids over funding retirement. So here at the Personal Finance Podcast, we want you to follow the oxygen mask method, meaning you take care of your own retirement first, and then you can help others.

38:30So when a plane is going down, you put on your own oxygen mask first, then you can help other people. Well, the same goes for your money, but most people do the opposite. And I get it. You want to help out your kids as early as possible, but 63 % of parents say they would go into debt for children's activities. That is one big thing that we have talked about this entire episode as a big no-no. We do not want you going into debt for child activities. And 70 % say they are saving for their kids' college is more important than saving for retirement. Absolutely not. And I get that most people think they need to prioritize that first.

39:01You want to put your kids first, but you need to make sure you're taking care of your retirement first. There are no loans for retirement and your kids are going to be taking care of you if you don't take care of your own retirement. That's the last thing that you want to do. Yet only 25 % of kids actually graduate college debt-free. And so this is something where we have poor spending habits coming into play, and we do not plan accordingly. So making sure that you put your retirement over child activities, especially college savings, is very, very important. Number six is holding too much cash for too little growth.

39:31So the amount of cash that we want you to hold typically is about six months of expenses in a high-yield savings account. And for people in their 40s, they hold three times more cash than recommended by most people. And so when they held all this cash, it means they don't get the maximum amount of growth over that time frame. And so just having a cash management plan can be really, really important. And then number seven, and this is a big one that I think more people need to have conversations about, but they have no plan for aging parents. In fact, 53 % of adults in their 40s are part of the sandwich generation, meaning they're supporting their kids and they're supporting aging parents at the same time.

40:04And nearly 62 % of caregivers give financial support to their parents. That is a heavy burden to hold where you have to take care of your kids, but you also have to give financial support to your parents. This is what I'm talking about, where you need to start investing now so you don't become the parent that needs that financial support. And the average out-of-pocket cost for those who are helping their aging parents is between$7 ,000 to$10 ,000 per year. And so without planning, elder care can become a sudden and big financial burden. And long-term planning should definitely begin before this crisis mode.

40:36This is one of the most underestimated risks in financial midlife is understanding this risk. And so starting to have these conversations, if you're listening in your 30s with your parents now, asking them what their plan is and actually opening up with your aging parents is really, really important. And then once you hit your 40s, then you guys have a plan in place and know what you're going to do. So those are some of the trends for your 40s. Now let's jump into the 50s. All right, folks, in your 50s, here are the seven worst trends of folks in their 50s and some things that we need to make sure that we are fixing.

41:08Number one is not taking retirement seriously until it's urgent. So if you are in your 50s and you don't have a retirement plan in place, now is the time we need to get a pants on fire emergency going and we need to take retirement seriously. The median retirement balance for folks in their 50s according to Fidelity is$189 ,000. And so we need to make sure instead that we are trying to aim for five to seven times our salary at least saved up in our 50s. And so 45 % of people in their 50s have no retirement savings whatsoever. And so your 50s are the last big decade that you have available to you to get the ball rolling and get saving for retirement.

41:41Now, you have the ability to have catch-up contributions in your retirement accounts, which is a huge benefit. And the earlier you adjust, the less drastic you have to be as you approach retirement age. So really important to make sure that you get all of this set up because once you're five years out of retirement, that's where I want you to have your retirement plan set in stone and buckled down so you know exactly what you're going to be doing. So go through everything. How much cash are we going to have? How much do we need to save? How much Social Security are we going to get? You need to be thinking through these questions and having a plan in place.

42:11Number two is staying in high fee financial products. So 1 % advisor fees can consume up to 28 % of your entire portfolio. And so a 1 % fee may not sound like a lot, but it actually is a huge, huge portion of your portfolio if you have those high fee products. And actively managed mutual funds can carry a 0.75 % to a 1.25 % fee as well. And so you have the advisor fee, you have the mutual fund fees, and so these are really, really high. And in fact, things like annuities can charge 3 % per year. So all of these are really, really important to make sure that you understand how impactful high fees are.

42:46Now, we've done entire episodes on fees, and we have some new ones coming out. So make sure you subscribe to this podcast because we have some big ones coming out for next year as well. Talking about the major impact of fees, but being in high fee products is something you definitely want to avoid in your 50s because it eats away at the dollars that you could have in retirement. Number three is avoiding hard financial conversations. And so 52 % of couples have not discussed how much they need to save to retire. 52 % when they are in their 50s. And so this is something where making sure you sit down with your spouse, start having money conversations, even if they're uncomfortable at first is really important.

43:2145 % have not discussed where they want to live. Are we staying here? Are we moving somewhere else with a lower cost of living? Are we moving closer to the kids? What are some of the things that we're going to be doing? And couples who regularly discuss money are two times more likely to feel confident about retirement. And so this is something that is very, very important for most people out there is they need to make sure that they are having constant conversations. If you're in a relationship, having conversations about money is one of the most important things that you can do. Number four is carrying debt into retirement.

43:50Adults over the age of 50 have$9 ,000 in credit card debt on average. And mortgage balances for people in their 50s have doubled since the year 2000. So as you approach retirement age, one of the big things that I want you to do is try to get rid of all of your debt so that when you reach retirement age, you don't have to worry about debt anymore. You don't have to worry about those extra payments, including your home. This is something where most people out there, if they start to get the ball rolling on this, they can have their debt paid off by retirement age and that just reduces their stress and anxiety in retirement.

44:18The last thing I want you to have in retirement is financial stress or anxiety. Instead, I want you to enjoy retirement. Enjoy the time that you have. But if you don't think about these things or try to put a plan into action, you're gonna get to retirement age and regret not having done this. Number five is having no healthcare strategy whatsoever. The average couple will spend$315 ,000 in healthcare in retirement. And 70 % of adults age 65 plus will need long-term care. 70%. Long-term care can cost anywhere from$60 ,000 to$120 ,000 per year. And so healthcare becomes one of the biggest cost items in retirement over that timeframe.

44:53And so we need to make sure that we are planning early to avoid any surprises whatsoever. And the risk of needing long-term care grows dramatically in your 50s and 60s. And so making sure you have a plan in place, having conversations with your children so they know what you want to be doing when it comes to healthcare is very, very important. But also having cash set aside so that you can pay for that healthcare is also very important. Number six is overestimating your ability to work forever. More than 50 % of retirees leave work earlier than planned, and most are due to health or job loss. So more than 50 % actually leave work earlier, and only 6 % retire later than expected.

45:28Those numbers are astounding, meaning 50 % leave earlier, 6 % retire later than they expected. So folks who say things like, I'll just work longer is not a retirement plan. You gotta make sure that you are thinking about your plan, putting your plan into place as early as possible in your 50s so that you don't get to retirement wondering what you should have done. Number seven is taking on big financial burdens later in life. So 36 % of parents in their 50s support adult children financially. And co-signing loans is becoming increasingly common. And many people who go out and buy their dream home in their 50s are taking on a huge portion of debt really late in life.

46:05And so this is something you want to avoid at all costs because if you start to take on a massive amount of debt in your 50s, that means that you're not gonna be able to become debt-free by the time you hit retirement age. And so we wanna make sure that we enter retirement completely debt-free. And so thank you guys so much for being here today. Those are the seven worst money trends by age. I truly appreciate every single one of you. Again, if you wanna help from us directly, please consider joining Master Money Academy. That is where I help people every single week master their money. where we have all of our courses in there.

46:36We have a community in there. I do weekly coaching calls. So all of those are included inside Master Money Academy. So I'd highly encourage you to check it out. We'll have it linked up down in the show notes below as well. Thank you guys so much for being here on this episode. Our goal is to bring you as much value as possible on this podcast. And so would love for you to subscribe and be a part of this journey. We have a ton of great content coming out for you in the next couple of weeks. So really, really excited for that. Again, thank you guys so much for being here and we'll see you on the next episode.

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