Ages and Stages – The Opportunities and Challenges of Financial Planning

April 08, 2020

Whether you are just starting out in life or in well into retirement, each stage of life presents different financial planning opportunities and challenges.  No matter what your age or stage, here are a thoughts for your consideration. 

Teenager Entering the Workforce While in School

Did you know that if you are working, you have earned income?  While many teenagers are working to help pay for cars or fun money, you have an incredible opportunity to start small and help set yourself up for a successful financial future.  If you have earned income, you have the ability to contribute to a Roth IRA.  A Roth IRA is a retirement account that you contribute to after you have paid income taxes.  The account has the ability to grow tax free for many years until you reach retirement and someday, when you take funds out of the account they will be tax free.

College Student

Classes, resume building, student loans…so much to juggle.  What you may not realize, is that the decisions you make in college can have an impact for many, many years to come.  College tuition costs are expensive and when you add in room and board as well as peripheral costs outside of school…it’s easy to exit college with a very large amount of debt that will take years to pay back.  While working in college and being conservative with your spending is not always the “fun” route, your future self will thank you.    

As a college student, if you can work to offset costs of college and living expenses you will have more available cash flow when you finish school to do the things that you want to do with you money.  And, just like a teenager just entering the workforce…you will likely be in one of the lowest tax brackets of your life.  So, if you can put away some of your income from your job in to a Roth IRA or other investments, you’ll be that much further ahead in your retirement savings and/or having accumulated a chunk of money for something like a down payment on a house when you finish school and settle into your first job post school.

Starting Out – Working Full-time, Starting a Family, Figuring Out Your Priorities

Whether you are freshly out of high school or college, starting out can be overwhelming.  Figuring out how to manage a budget, manage debt, and/or combine finances can lead to stress.  Having an accountability partner, like a Financial Advisor who is helping you get started on the right foot, can be a very helpful tool.  As you are starting out, here are a few priorities to consider:

  1. Build a budget - what is coming in and what is going out
  2. Set up an emergency fund – target 3 months of what you spend as a starting point
  3. Use credit cards sparingly – minimum payments and constant balance transfers do not help you get ahead
  4. Start contributing to retirement – make sure you’re putting enough away to get the full employer match
  5. Evaluate your need for life insurance – you aren’t going to get any younger and healthier

It can be tempting to just focus on debt payments or spend right up to what you make pay period after pay period, but getting started on the right foot when you are young, can set you up for a much more financially secure future.

Young Family, Friends and Obligations

As a mother of three little boys, I fully understand the expenses related to diapers, formula, daycare and the seemingly endless need to replace shoes and jeans with holes in the knees. During the early phases of life, it can be tempting to reduce retirement savings to help compensate for expenses related to raising children, spending social time with friends and paying the newly acquired mortgage. However, robbing your retirement savings now will put you at a disadvantage down the road. 

One of the best things you can do as a young adult navigating parenthood and all of the “adulting” that goes with it, is to meet with a Financial Advisor regularly to make sure that you are putting your money I the right places and taking action to position yourself for the future.  Have a financial plan early in life, knowing that the plan will need revision as your life changes, can significantly help you to exceed the progress of less accountable peers.