Financial Planning - Stages of Life
Our needs and concerns change as we
move through the financial stages of our lives. Here is a brief overview
of those stages and some of the financial issues you'll probably need to
think about.
Ages 0-20
You're most likely through this
stage, but your kids may not be. Help them succeed in the remaining financial
stages of their lives by teaching them sound financial habits. Show them
how to budget an allowance. Open their first savings account. Once they
start earning money, open an individual retirement account to teach them
how to invest for retirement.
Ages 21-30
Establish good credit. Learn to
use credit cards wisely. Whittle down any college debts as quickly as possible
to free up money for investing and other financial needs. Start saving
at least ten to fifteen percent of your income for retirement.
Time is on your side, and time is
what makes money grow. Learn good spending, debt management and savings
habits—they'll pay off big the rest of your life. Sock away the down payment
on a home.
If you marry, do some pre-marriage
financial planning. Clashing money management styles are a leading cause
of divorce. Buy life insurance, and if you work, buy disability insurance—people
are depending financially on you now. Be sure you have medical coverage
for you and your family, even if it's provided at work. Draft a will,
married or not, and a power of attorney and a living will in the event
you're incapacitated.
Ages 31-40
You may be into your second or third
(and more expensive) home. Children are being born, getting older, getting
more expensive. You're probably feeling financially pinched by now, even
if you're earning more.
However, don't suspend making contributions
to your retirement fund. If it comes down to a choice between funding college or funding retirement, many financial planners recommend that retirement
should take priority. Kids can always find other methods to finance their
way through college, like scholarships or loans. No one else is going to
pay for your retirement.
Update your will, if necessary, and
periodically review your life insurance to make sure it is adequate, especially
if you have children.
Ages 41-50
You're probably in the stride of
your career. Keep socking away for retirement. One thing to consider at
this stage is aging parents. Will they be able to financially take care
of themselves should they need home health care or a nursing home? Or will
you be expected to pay some of the bill? Consider buying long-term care
insurance for them if they can't afford it. Discuss with them their potential
financial needs and concerns. Make sure their estate plan is in place.
Expenses may start to ease off in
this stage as your children reach maturity. Beef up your retirement contributions
to at least 15 percent, maybe 20 percent or more, of your income. This
will probably be the last good stretch to really sock it away.
Start getting serious about your
vision of retirement, too. It will make a difference in how you plan. Don't
get too conservative in your investing at this stage, even if you plan
to retire soon. You've got a lot of years of living left and plenty of
time to weather market ups and downs. Get serious about an estate plan.
Ages 51-60
Study your EPF options to make sure
you take full advantage of them. Be sure you don't have gaps in medical
coverage. Consider working part-time in retirement. A rocking chair can
get boring after a while. Buy long-term care insurance if you haven't already.
Carefully review retirement plan
payout options. How you choose is immensely important. Absolutely have
an estate plan. Investments may grow more conservative but should not be
too conservative. With good health, you'll have many years left to live
in retirement and you'll need your nest egg to stay ahead of inflation.
Ages 61 and beyond
Hey, slow down and enjoy your success.
You've earned it! Talk to your kids about your estate. |
