Financial Flexibility Through Life's Seasons
Do you ever think about life never stands still? It’s ever changing. With each stage of life comes a new set of financial challenges and opportunities. Whether you're just starting out, merging finances with a partner, a seasoned professional, changing careers or moving into retirement, adjusting your financial plans through these various stages is not just helpful, its essential. It’s how you maintain long-term stability and achieve your goals. As our personal goals change, our financial strategy should change too.
We are breaking down ideas to adapt your plan as you navigate these phases.
Are you a young adult just entering the workforce?
This can be a truly exciting time but it can also be a little scary, especially with a challenging economy. You may be starting a new job or making your first big financial decisions. The key here is start strong by establishing a solid financial foundation.
Start with a detailed budget where you are factoring in your new income and living expenses. Sticking to a budget is a great habit to establish and this is the time to start that habit!
It’s also the perfect time to build an emergency fund to cover unexpected expenses. In many ways this should be a priority. The goal is to save enough in your emergency fund to cover three to six months' worth of living expenses. Again, this is a great time to build that saving habit.
This is also the time to think about retirement. It may seem light years away, but it will be here before you know it. Starting early allows you to compound your interest. Think about how many years you will gain interest on your money! And if your employer offers any kind of matching contribution, your funds will build that much faster. You can also be a little more aggressive with how its invested, while you have more time to recover if there is a loss in the market before you would actually need the money. The younger you start the more you will have later. Even if you start small, start.
And finally, consider being more aggressive paying off any loans you have, like student loans. This frees up that income in the future. And if you are just starting out, you probably don’t have the same financial obligations as you will later in life, so it’s worth taking advantage while you can.
The next phase is mid-life where career and family changes, change your financial responsibilities.
This is a time where you may be buying a home, or expanding your family. So, you are adding things like mortgages, bigger car notes and all the things that come with having more people in your house!
You may even be considering investing in more education or training to help you advance in your career. Plus saving for your kids educations. So of course you will need to adjust your budget to accommodate those changes.
You also need to review and make adjustments to all your insurance coverages. You want to upgrade your life and disability insurance since you have more liabilities to be responsible for now. It’s important to make sure those are properly covered.
Remember those retirement risks we talked about? Now is the time to take a look at your retirement strategy. At this stage, you are most likely still young enough to take greater risks and still have time recover if you need to.
Major life changes such as a marriage, divorce, or career changes that can have significant impact on your finances.
Any of these scenarios should prompt a fresh look at your finances.
That includes adjusting your budget, changing your estate plans, and updating your will and beneficiaries. You will also need to make sure that your savings and investment strategies are aligned with your new situation. This will even include taking a look at your tax withholding and how you file.
It’s a good idea to consult with a financial advisor that can provide guidance. They can offer personalized advice for your specific needs.
Are you Preparing for retirement?
If so, it’s time to shift your focus towards preserving wealth and planning for income distributions. You will want to evaluate your investment risks and see what your tolerance is at this time and maybe consider moving investments to more conservative options so your nest egg is protected.
It’s also critical to plan for future healthcare costs. Let’s be honest, they will likely get higher as you age, so it’s important to make sure those needs are taken care of. Also, focus on debt reduction if you haven’t already.
It also may be time to maximize your retirement contributions to ensure you can fund your chosen lifestyle as you enter your golden years.
BONUS
One thing is often forgotten is how importance of maintaining our emotional resilience and our mental health in our financial journey.
Our financial well-being is so deeply intertwined with our overall mental and emotional health but we often just over look it or try to push it down and ignore it.
But often financial planning and finances in general can bring about some strong emotions and can be a source of stress. And stress can affect how we behave with our finances creating anxiety about money. This can lead to making poor decisions or being frozen in fear unable to move forward.
These are just a few of the reasons that learning how to manage our money and creating healthy habits can help us not only be financially resilient, but emotionally resilient as well.
It gives us confidence that we are making sound decisions and that we can adapt to these changes when they happen.
Being present and mindful of your situation, realistic about your goals and your finances are vital to your financial health. So is getting help, both financially and from a mental health professional when you need it.
You want to be prepared financially but also prepared to handle the emotional ups and downs that life may throw your way.
When you are aware of this connection and you acknowledge it, it’s easier to then address it and start to create a healthy relationship with money, which makes this journey easier to navigate.
Financial plans are rarely one and done.
But preparing will help you confidently embrace these changes.
Regularly reviewing and adjusting your financial strategy will help not only ensure you are aligned with your current needs, but it also ensures you are prepared for a more comfortable and secure future.
Some of the biggest keys to financial resiliency and stability is to stay informed, make proactive adjustments and get the advice you need. And don’t forget, you can visit with a certified financial counselor at either branch of First Pioneers for help as you navigate your financial journey.