Tips for Life Planning for Every Stage
If you’re a novice to the concept of life planning, it’s important to get started as soon as possible. For every stage of your life, there’s something you can be doing right now to better plan for when that time comes. The best time to start making a plan was yesterday, but the second-best time is right now. Here are some tips for planning for every stage of your life.
For the immediate future
The first thing you can do, right now, is to plan a budget, start saving, and begin to focus on paying down debts. These are the first three steps you need to take before you can even think about making investments for the future.
TipsAs far as budgeting goes, it may help to go with a tried and true technique known as the 50-20-30 rules. With this budget, 50% of your take-home income goes toward necessities - bills, utilities, and food. After that, 20% goes to savings and paying down debts. The final 30% is for your discretionary spending - fun and activities, travel, new clothes, etc.
Once that budget is in place, you can begin to funnel money into an emergency fund that will be there when life throws you a curveball like a car repair, medical expense, or job loss. It’s important to have that emergency fund so that you don’t have to borrow money to pay for life’s little expenses. Speaking of debt, you need to start paying down debt before you can make many new investments. Start with credit card debt, as it tends to be the most volatile.
For when you have kids
If children are in your future (and they are for most people), you need to create a plan now for how you’ll pay for the many expenses they bring with them. This includes day care costs, private school or tutoring costs (if that’s the path you decide to go), and of course, college costs. For some future child costs, a traditional savings account or custodial account will work. For college costs, a 529 plan may be your best route.
For when you want to retire
“A rule of thumb is to assume you'll need 80 percent of your current annual income in retirement. Subtract any known retirement income such as a pension or Social Security, and you have the amount you'll need per year in retirement,” says Bankrate. “According to the Social Security Administration, the normal retirement age is about 66 years. Many financial planners recommend running your financial plan to age 100, which means workers need to plan on financing about 34 years on average.”
Yes, that sounds like a lot, but if you start to develop a plan now you can take advantage of the compounding nature of investments to make sure you earn the most off your money as you possibly can. For most, retirement planning is a multi-pronged approach involving taking advantage of your employer’s 401K matching as much as you can, coupled with outside investments into things like a Roth IRA.
For when you die
Morbid, maybe. Necessary to consider at an early age? Absolutely. Death is inevitable, and you must plan for it as early as you can. This means getting your wills and testaments in order, figuring out your own funeral/burial costs so you don’t burden those you leave behind, and consulting financial planners on the best ways to ensure your property has a clear deed upon inheritance. Death planning is a part of, and in fact one of the most important parts of any comprehensive life plan.
Photo Credit: Pixabay.com
Author: Chloe Pearson