The 5 Life Stages of Finances
Not everyone falls into the following categories over the course of their adult life but in general, this is a guideline of what you may expect at different stages …
You may be a student working part-time or be part of the workforce full-time, but either way you will learn how to become financially independent and how to budget during these years. It is a time when you may have a bit more freedom in what you do with your money, but it is still a good habit to save a portion of your money. There may be student loans to pay back which will teach the importance of paying back debt. You may still live with parents where you are contributing towards the household costs or if renting this will teach you to budget each month.
You may plan for some of the bigger life decisions during these years e.g. purchasing a home / starting a family / getting married. Clearing debts such as credit cards or loans is important at this stage when applying for a mortgage, along with saving for a deposit. Mortgage Protection will protect your house should something happen to you (or a spouse), but it is always good to have an emergency savings pot once children come along. You could start contributing towards a pension either through your employment or a personal plan.
At this stage if you do not have any additional Life or Serious Illness cover, then this is important if you have a family to think about.
This is a time for putting a plan in place for further into the future, whether for your children’s education, your retirement (pension) or savings pot. Keeping debt at a minimum and carrying out an overall financial review on incoming and outgoing funds is helpful.
You might hope to finish paying off a mortgage in this stage of life. If you have children, they may be nearing adulthood and becoming less dependent on you financially.
Reviewing your retirement portfolio now is a good idea and if you can max out your retirement contributions then go for it. A financial planner can guide you with this and ensure that your current savings plan will provide you with enough money to retire. It is wise to check that your investments are at an appropriate risk level.
Make sure you have enough money in retirement savings to support yourself and your family.
If you do not already have a will, get one drawn up and plan your estate.
Have a question? #JustCallOran on 087 6686624. Happy New Year to all the Meath Coaster readers!