Your 2os are the most critical decade for your financial future, says Mary Hunt, the founder of personal finance site Debt-Proof Living. Even though your income is low and your debts are high, establishing good habits when you're young can make all the difference.
In her recent book, "The Smart Woman's Guide to Planning for Retirement," Hunt runs down the most important benchmarks you should hit in every decade to stay on track for your retirement.
Below, we've summarized her advice for managing your money in your 20s, 30s, and 40s.
In Your 20s
Develop your financial intelligence. Your 20s are the time to get your act together, says Hunt. Figure out where your money's going, come up with a plan for spending and saving it, and regularly monitor your execution of that plan.
Start an emergency fund. Begin putting aside money in a risk-free savings account that you'll be able to easily access in case something happens, such as a serious illness or job loss. Hunt suggests setting a goal of six months of living expenses.
Open a retirement savings account. Join your company's 401k plan, and invest at least to the match, which is typically 3% of your income. Hunt also suggests opening and contributing to a Roth IRA. She advises starting by setting aside 5% of your annual income, which would be split between both accounts, and steadily raising the percentage with each salary increase you get.
In Your 30s
Fully fund your 401k and a Roth IRA. Now that your career's on course, Hunt advises funding your retirement accounts to the maximum. Set up automatic deposits so you don't have to think about it.
Buy a home. Since you've been saving through your 20s, you should be able to use some of that money for a solid down payment. However, Hunt recommends that you don't buy the house you can afford, and instead she suggests purchasing a home about half that price. Then pay it down as quickly as possible, with a goal of owning it outright.
Don't succumb to consumer debt. Your 30s are typically the time when you're having children and settling into a home, which can mean a lot of spending and racking up debt. Beware of lifestyle creep, and stay focused on keeping your debts down.
Set a goal for college savings. If you want to contribute to your children's college education, Hunt recommends beginning to save as soon as they're born. She says a state-sponsored 529 plan is usually the best way to go.
In Your 40s
Make retirement savings your main goal. In this decade, even though your kids are nearing college age, Hunt warns against prioritizing saving for their education over your retirement goals.
Adjust college savings. Now's the time to check tuition costs and make sure your savings are on track for your children's college. You may need to adjust those savings or have a conversation with your kids about how much you can afford to help and which schools are realistic for them to attend, she says.
Invest in an index fund portfolio. If you have savings beyond what you need to cover emergencies, Hunt recommends you aggressively build an index fund portfolio at a company like Vanguard or Fidelity. She says your best bet is to set up an automatic purchase plan that steadily adds more shares to your account, and then forget about it.