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A Checkup For Your Finances at Every Age

A Checkup For Your Finances at Every Age

November 03, 2016

Most people visit their doctor at least once a year. You get vaccinations to prevent diseases, checkups to nip any blossoming issues in the bud, and medications or tips on how to fight illnesses. It’s crucial that you do the same with your financial health so you can plan ahead for the future and employ strategies to overcome hurdles.

Just as you shouldn’t self-diagnose yourself if you aren’t a doctor, it can be challenging to know what you’re doing incorrectly (or what you can do better) with your money if you aren’t an advisor. For many, it can be difficult to get on track with their finances, whether it’s budgeting, creating a savings plan, or investing.

According to a study by the National Association of Personal Financial Advisors (NAPFA), 56% of U.S. adults don’t have a budget, 39% don’t have any non-retirement savings, and 50% with children don’t have a will. This lack of financial preparedness can create a lot of hiccups down the road and cause you to have more questions than ever.

How Financial Planning Can Help

Financial planning not only helps you implement strategies to maximize your savings and boost your asset growth, but it can make you feel more confident in your future, make more informed decisions, and answer important life questions, such as:

  • When can I retire?
  • Do I have enough money to buy a home?
  • Do I need life insurance and disability insurance?
  • What are my spending habits?
  • How much do I need to save to reach my long-term goals?

While you may be able to address some of these questions yourself, most people lack the time and energy to do so, and it can be hard to look at your situation with an objective eye. That’s why many people consult with an independent financial advisor who can provide education, guidance, and unbiased advice.

Financial Planning At Every Age

Let’s turn our attention to a few of the significant planning needs that occur at different stages of life:

In Your 20s

You may just be launching your career, but now is the time to start saving for retirement. Consider it an essential expense, on the same level as your rent, utilities, and cell phone bill. The earlier you start saving for retirement, the more you can benefit from compound interest.

Along with saving for retirement, your 20s are the time for you set the best financial pattern in terms of budgeting, especially if you eventually want to purchase a home, travel, or make another large purchase.

In Your 30s

When you are in your 30s, you’ll need to evaluate where your career is going, whether you want to settle down in your home, if you’re ready to start a family, and how to pay off student loan debt more aggressively.

A financial advisor can help you budget for a growing family, evaluate mortgage rates and the costs of selling and buying a new home, tackle debt while still saving for retirement, and more. And if children are in the cards, it may be time to look at your disability and life insurance options.

In Your 40s

At this point in life, many parents find themselves at a crossroad with the challenge of saving for your retirement and also saving for your children’s college tuition. It's a fragile balance because you don’t want to put your retirement at risk to cover expensive tuition costs. This is an important time in life to look at college planning opportunities and get your financial house in order.

If you don’t have kids, this is a good time to get ahead on your mortgage and any other significant debts. The goal is to pay off as many loans as possible before you reach your retirement years.

In Your 50s

In this decade, you’re quickly approaching your retirement years, and this means it’s time to get serious about your future needs. Beyond your disability and life insurance, does it make sense to consider long-term care insurance?

This is also the decade to explore exit planning (if you run a business), potentially rollover any 401(k) plans into IRAs, make sure you have a current will in place, and evaluate your retirement lifestyle, including where you’ll live and what you’ll do with your time.

In Your 60s

Along with solidifying your retirement income and solving any cash flow problems, this is a critical time for Social Security planning. There are a lot of strategies involved to help you claim when it makes the most sense for you while still receiving the maximum benefits.

Along with Social Security, you’ll need to determine when you’ll withdraw from your 401(k) or IRAs, how to maintain a consistent income, and work to make sure you have an estate plan in place.

In Your 70s, 80s, and Beyond

Age 70 is a big year. At 70, you’ll need to start taking Social Security payments (if you haven’t already done so). And at 70½, you’ll have to start taking distributions from your IRAs and previous employer 401(k)s (if you haven’t started yet).

Throughout the decades, you’ll want to keep an eye on your spending, maintain your health, and regularly update or review your will and estate plan.

Ready to Start?

Wherever you are in life, there’s no time like the present to start planning for your financial future and set yourself up for success. If you have questions about your current situation or have yet to start planning, contact us today at 909-981-1720.

About Philip

Philip A. Board MSFS, CFS, is a retirement planning specialist and the founder of 1on1financial, an independent comprehensive investment firm serving individuals and businesses near Upland, California. Through educational workshops and a non-sales environment, 1on1financial specializes in working with employees of Southern California Edison, UPS, Esri and Verizon.