As you grow older and hopefully wiser, ideally your money management skills should  grow as well.

One obstacle to this is that you need slightly different strategies for each stage of your life.

Currently, no matter what stage of life you are in, it’s important to be growth focused and maintain a positive outlook on your finances.

Note:A solid financial strategy can help you build a more financially secure future for  you and your family.

In the Beginning, Money Management…..

To start, it is important to have an emergency fund in a separate savings account. This fund is the foundation of  money management. Whether you are young or old, it’s very important to keep SOME cash around.  (around means in the bank, not in a shoebox)  You should accumulate up to six months worth of expenses to cover:

• housing
• food
• utilities
• transportation costs…

Once you have successfully built up your emergency fund, work toward defining your short-and long-term financial goals.

Build an action plan to achieve those goals in a realistic time frame!

Example:  I will save $100 a month for the next 10 months to accumulate $1,000 to buy X

With your goals set and your plan in motion, you will need to regularly review your personal finances.

Solid Ground-Time to Move Forward

When you reach a new stage in life, such as getting married, buying a home, or the birth of a child, it’s important to adjust your goals accordingly. Some things fall off, other things jump on the list.

Here are some milestones and what to do financially when you reach them!

Your First Job

While it might sound a little crazy, your first job is the ideal time to consider retirement!

When you obtain your first permanent full-time position, you hopefully will be offered a workplace retirement plan to participate in  (401k plan-is the most common type in corporate america)  It is never too early to begin saving 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.

Consider the growth potential of a few thousand dollars over the course of thirty years.  This amount will grow exponentially.

For example: Saving$5,000 a year for 30 years can potentially grow to $332,194  (hypothetical 5% growth rate, real results will vary)

Since the combined effects of time and compound interest are powerful, the sooner you start, the better.

NOTE: Always contribute enough to your retirement fund to take full advantage of any employer-provided matching contributions. FREE MONEY!

Insurance

Definitely  investigate the insurance provided by your employer, including health, life, and disability insurance. Insurance is a necessary evil.

We all hate paying for it, but sure glad we have it if we get sick or hurt!

If  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.

In order of importance

1. health insurance–one hospital stay can destroy your finances
2. disability insurance- income keeps you independent
3. life insurance-needed if others are dependent on you.   (see previous post on life insurance here)

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, funds in your retirement plans might need to be rolled over as you continue to save.

Marriage

Marriage changes your life permanently in every way, including financially.  You may consider opening a joint bank account, owning or purchasing property jointly, and sharing auto and/or health insurance. I’m sure soon after tying  the knot, you will want to begin saving toward the purchase of your first home and other mutual goals, such as raising a family. You may also want to look into a prenuptial agreement that will assist in a civil separation if necessary. While it may be unromantic, it’s important to consider the “till death do us part” portion of your vows.

You may need to update your will and life insurance. Obtaining and/or updating life insurance coverage to reflect a name change  is important too.  You should consider  naming your spouse as beneficiary to help ensure that financial goals will continue to be met.

Note: I come across so many forms that still list parents or EX’s as beneficiaries.  Make sure these are correct!

Marriage will also require a review of your retirement goals to establish a savings plan to meet your retirement needs. I recommend you have an open and honest discuss about your future. If you are not on the same page there will be big trouble down the road.  Your taxes also change significantly after marriage. Be sure to consult with your tax advisor for the most effective strategies.

New Home or Refinancing.

Buying a first home is an exciting milestone. Whether you are a first-time homeowner or are looking to refinance, research the various mortgages available. Also, purchase a homeowner’s insurance policy to protect your home and its contents from covered losses. This is an opportune time to evaluate any life insurance policies you 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 eighteen years or more of 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, 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 the time to enjoy the fruits of your labor. You may want to relocate to a warmer climate and anticipate the adventures awaiting you. If you live in the northeast, you know why.

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.

Finally

By following the general advice in this post, you will approach each milestone in life more financially 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.