Whether you like it or not, life and money are intrinsically linked. Each transition in life and each milestone you achieve presents its own set of financial priorities. Most people wait until they reach 40 to think about money as retirement nears. You don’t have to do that. The earlier you start saving, the more you’ll earn over your lifetime. Here’s a financial guide that talks about what you need to do when you hit the key milestones of your life.
A Guide to Each Financial Milestone
1. Entry into the Workforce
- Make a budget and stick to it. That’s how you’ll be able to build wealth.
- Track your expenses. Make use of free online expense trackers to monitor your spending and earnings. It’s the best way to understand where your money is going and make the necessary changes in your budget.
- Pay down your debt. As you are in the first stage of your working life, you may have credit card debt or student loans to pay off. Paying off these loans should be your priority.
- Start saving. Your income may not be enough for you to put away huge chunks of money in savings. But save you must. Make saving for future a habit; however, small the amount is, start saving.
2. Career Advancement
- Get a raise within the same company. Research your job elsewhere in the market to present a case for a raise.
- Negotiate your salary when you switch jobs.
- Know what financial planning and budgeting you need to do before you get married.
- Create your will. Update your beneficiaries, power of attorney, etc. Most people update their will with their spouse’s name.
- Consider getting life insurance. Research, evaluate, compare other insurance policies.
4. Real Estate
- Buy a house. Ensure that it doesn’t put too much financial stress on you.
- If you haven’t bought life insurance yet, and you are married, consider taking life insurance now.
- If you haven’t, draw up a will now. Make sure your assets are protected and your children get a guardian if anything happens to you.
- Make sure that you have saved enough for your children’s college education. You may want to take an education loan to send your child abroad for studies. You may even want to consider getting a personal loan for education expenses.
- Teach financial lessons to your children.
6. Established Career
- At this stage, you are probably earning the highest. So, invest more in your retirement savings.
- Earning more also means that you are liable to pay more taxes. Be proactive in your tax planning. Take help from a financial planner to analyze and guide you on your investment choices according to your tax liabilities.
7. Retirement – The Final Financial Milestone
- Know your budget. Even before you retire, take an estimate of what your income and expenses are going to be.
- Review your investment profile. Assess the risk tolerance; you don’t want to suffer a big loss at retirement.
- Downsize. Move into a smaller home. Your utility bills, property taxes, and other liabilities will reduce.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at email@example.com.