Money Management throughout Life Stages

Money Management throughout Life Stages

October 08, 2018


On the way to developing and maintaining your financial well-being, the ability to successfully manage your personal finances will play an important role. A solid financial strategy can help you work toward a more financially secure future for your family. 

To start, it is important to have an emergency fund in a separate savings account. Once you have accumulated up to six months’ worth of income to cover housing, food, utilities, transportation costs, etc., you can work toward defining your short- and long-term financial goals, and then constructing a plan to address your objectives.

With your goals set and your plan in motion, you will need to regularly review your personal finances. When you reach a new stage in life, such as getting married, buying a home, or the birth of a child, here are some milestones to consider:

Your First Job. When you obtain your first permanent full-time position, you may be offered a workplace retirement plan. It is never too early to begin saving and investing for retirement. Taking advantage of your employer’s plan as soon as possible will give your account the maximum amount of time and potential to grow. Since the combined effects of time and compound interest are powerful, the sooner you start, the better. Try to contribute enough to your retirement fund to take full advantage of any employer-provided matching contributions.

Consider any insurance provided by your employer, including health, life, and disability insurance. If the insurance coverage offered through your employer’s benefit plan does not meet your needs, or if insurance is not offered at all, look into obtaining coverage independently.

If you change jobs, you may find that benefit plans vary greatly from employer to employer. Therefore, changes in insurance coverage and retirement options must be factored into your personal financial plan. For example, you will need to evaluate the appropriate option for your previous employer’s retirement plan as you continue to save.

Marriage. Weddings are special occasions that become cherished memories, but can also affect your financial situation. You may consider opening a joint bank account, owning or purchasing property jointly, and sharing auto and/or health insurance. You may also want to begin saving toward the purchase of your first home and other mutual goals, such as raising a family.

Obtaining and/or updating life insurance coverage to reflect a name change, if applicable, to name your spouse as beneficiary can help ensure that financial goals will continue to be met. Marriage will also require a review of your retirement goals to establish a savings plan to address your retirement needs. Getting married can also affect your tax situation. Be sure to consult with your tax advisor for the most effective strategies.

                                    RECOMMENDED READ: How to Invest for Major Financial Goals

New Home or Refinancing. Buying a first home is an exciting milestone. Whether you are a first-time homeowner or are l ooking to refinance, research the various mortgages available to find the most appropriate one for your circumstances. Also, purchase a homeowners insurance policy to protect your home and its contents from covered losses. This is an opportune time to review any life insurance policies you may have to ensure that mortgage obligations can be met in the event of your premature death.

Children. With the added joy of a child comes financial responsibility. If you and your spouse are both working, you may need to plan for child care expenses, or you may perform a cost-benefit analysis to determine whether the income of one spouse could meet your family’s needs. Update your health insurance to include your child, and review your life insurance policy to ensure you have adequate coverage and to add your child as a contingent beneficiary

For an infant, college may be 18 years away. Yet, the sooner you start saving for higher education, the better. Children may also change your estate plan. Writing or reviewing your will becomes especially important to see that your child will be provided for.

Starting Your Own Business. Leaving your job to start your own business can be an exciting adventure. As you assume responsibility for establishing, maintaining, and growing your business, be sure to consider the benefits that were previously provided by your employer. It is important to maintain retirement plans and disability, medical, and life insurance coverage as you continue building your financial independence. 

Retirement. Retirement is a time to enjoy the fruits of your labor. You may want to relocate to a warmer climate and anticipate the adventures awaiting you. Your finances come in to play as you make your retirement dreams come true. Maintain adequate health care coverage, and stay informed of your future care options. Proper planning can help preserve your hard-earned assets.

As you approach each milestone in life, the additional planning can be well worth the effort to become financially independent and prepared for whatever life brings your way. Remember to conduct annual checkups to assess your financial goals, so you can help provide for your loved ones, and build for your future.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.