Effective Financial and Investment Advice by Age Group
When dealing with personal finance, people have their own understanding of this matter. But all of us have one common goal about spending and investment regardless of our opinion and differences.
That is to attain financial sovereignty and still maintain a stable life after employment. There are tough financial times that call for desperate financial measures. Many people are saving now and spending later. Most of them are more concerned with their financial life after employment and also be financially prepared for other unforeseen expenses. As you welcome every stage in your life, you have new decisions and changes to make on how to best use your money. All financial goals cannot be actualized at once. You need a framework with targets to help you meet your financial goals. The following are financial tips that will help you understand how investment work and how to allocate your finances as you move from one stage of your life to another.
In your 20s – Savings
At this age, you are best suited to build a solid financial foundation. You may not have a lot of money but you have more time at your disposal.
- Start to save
The earlier you start, the more time your money has to grow compared to starting at a later time. You can decide to contribute a certain percentage of your total income to investment or to a savings and retirement account such that you will have a lump sum amount in your golden years when you retire.
- Create an emergency fund
Emergency funds cater to all expenses that are unforeseen or unplanned for. Setting aside enough cash to cover for such expenses for three to six months keeps you safe from being caught unaware and which could cause a dent on your budget.
- Avoid consumer debt
At this age taking out outrageous debts is quite early. Accumulating debt at this young age will only make your financial future very stressful from collection calls by creditors. Therefore, it is advisable to avoid certain types of debts such as credit cards. Most shoppers use these cards despite their high-interest rates. Credit cards also have a tendency of encouraging consumers to over-shop and make purchases that are not necessary. To avoid such temptations, it is advisable that you make most of your purchases in cash. This will save you from impulse buying.
- Live within your means
You should make your life quite easier with what you earn currently. Do not try to overstretch your finances to a point you cannot manage. For instance, instead of buying yourself an apartment, it will be wiser to get a roommate to share the rent cost. Trying to get what is beyond your financial reach will only drown you in debt.
In the 30s – Investment
In this phase of your career, you are likely to be making more money. However, financial responsibilities also seem to mount as you get married, have kids and buy a house. It is imperative that you review your budget and adjust accordingly to accommodate these changes. You should also set your priorities.
- Up your game on savings
With a better income and more responsibilities on your way, you should make an effort to save more.
- Get insured
With more money, assets, and family, make sure that you are all well protected. Consider insurance policies that work for you and your family. You may consider looking into property insurance and life insurance policies.
Instead of putting money in a savings account, you might consider putting it to work. Open an investment account and choose an investment that offers you the opportunity for financial growth. Investment guarantees financial security for later years.
- Keep your debt in check
At this age, you sometimes have to approach financial lending organizations to boost your financial savings to accommodate various expenses which are brought about by having a family or buying a house. However, you should be on the lookout for loans that charge exorbitantly high interest rates such as credit cards and other forms of short- borrowing. These kinds of debt have a negative impact on your credit score and may undermine your ability to apply for a financing someday. Whenever possible, it is wise to forego them and use other available options such as cash. You should also consider other forms of debt that have terms and conditions favorable to your financial needs. Paying your debts promptly should remain your key responsibility if you want to maintain a good credit score.
- Avoid lavish lifestyle
An increase in salary comes with an overpowering urge to spend. You tend to go for luxury items just because you can afford them. This is not a wise idea at all. Instead of living a short-term lavish life, it is better to shift these extra funds to your savings, retirement account and taking up insurance.
In your 40s – Pay off debts
In this phase, bills and debts could become more pressing despite your growing salary.
- Pay off your debt
At this age, you probably have some debt in the form of mortgages, credit cards or car payments. Now would be the most appropriate time to pay them off so that you can be debt-free by the time you are fifty.
- Save for your children’s education
You should consider educational accounts that help you save money to cater for your children’s education when the time is ripe. Make certain contributions to this account to avoid loans.
- Check on your retirement savings
If you have not started saving, this would be the best time for you to dedicate a certain percentage of your total income to your retirement account. At this age, it may require you to save a chunk, but someday, it will be worthy. If you had started your retirement savings early enough, you might also consider increasing these savings.
- Consider disability insurance
At this age, look into taking up a disability insurance cover if you don’t have it in the first place. This is because chances are quite high of one becoming disabled at some point in life.
In your 50s – Get ready for retire
The time for you retire is close.
- Re-evaluate your retirement savings
Now is the best time to evaluate your savings and make the necessary adjustments accordingly.
- Settle your outstanding debts
You do not want to enter your retirement phase with debt. It can be very stressful waking up to threatening collection calls when you do not have a recurring income after retirement. Your retirement savings should also not be spent paying your debt. That will only leave you poor. So settle them as early as possible to guarantee a debt-free and stress-free retirement.
- Consider long-term care insurance
This insurance policy covers things like nursing homes and in-home care in the event that you need professional care. Considering this type of insurance relieves your loved ones of the burden who would otherwise have take care of you.
In your 60s – Retire
This is the age at which most people decide to retire.
- Review your retirement income plan
At this phase, you may have cleared some expenses such as mortgages. However, that doesn’t mean you are done with expenditure. You should adjust your budget to accommodate other expenses such as medical bills and more.
- Downsize your expenditure
At this stage, you do not need a lavish house. It is critical that you consider shifting to a smaller home or apartment. Most kids have left home by this time. Living in a smaller apartment minimizes on the upkeep costs, property taxes, utilities and more.
- Review your estate plan
It is critical to have a review on whether you need to make certain changes to your will or health care proxy.
Financial sovereignty is not something that can be attained in one day. It takes time as you go through different life stages. The journey requires you to exercise self-discipline, have the determination and focus so that you don’t lose sight on your financial goals.
Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.