By Joni Lindquist
At KHC, we believe money is merely a tool…used to help you accomplish what you want in life. And naturally, those wants (and needs) change as you travel life’s journey. While no one can predict the future, there are a few over-arching principles to money management to keep in mind during the major transitions in life.
Universal Step One: Emergency Savings. To start, it is important to have an emergency fund in a separate savings account. Once you have accumulated up to six months’ worth of income to cover housing, food, utilities, transportation costs, etc., you can work toward defining your short- and long-term goals, and then building an action plan to help meet your objectives.
With your goals set and your plan in motion, you will need to regularly review your personal finances. It helps to have a trusted advisor along the way.
Your First Job. When you obtain your first permanent full-time position, you may be offered a workplace retirement plan. It is never too early to begin saving for retirement. Taking advantage of your employer’s plan as soon as possible will give your account the maximum amount of time and potential to grow. Since the combined effects of time and compound interest are powerful, the sooner you start, the better. Try to contribute enough to your retirement fund to take full advantage of any employer-provided matching contributions.
Consider any insurance provided by your employer, including health, life, and disability insurance. If the insurance coverage offered through your employer’s benefit plan does not meet your needs, or if insurance is not offered at all, look into obtaining coverage independently.
If you change jobs, adjust your plan to account for changes in insurance coverage and retirement options.
Marriage. Congratulations – you’ve found “the one!” Right off the bat, weddings are often sacred special occasions, but they can also be expensive! Longer term, you and your spouse may consider significant money management changes such as opening a joint bank account, purchasing property jointly, and sharing auto and/or health insurance. You may also want to begin saving toward the purchase of your first home and other mutual goals, such as retirement and raising a family.
We suggest updating your life insurance coverage to reflect a name change, if applicable, and to name your spouse as beneficiary to help ensure your mutual goals are met. Getting married can also affect your tax situation. Be sure to consult with your tax advisor for the most effective strategies.
New Home or Refinancing. Buying a first home is an exciting milestone. Whether you are a first-time homeowner or are looking to refinance, research the various mortgages available to find one that best fits your needs. Also, purchase a homeowners insurance policy to protect your home and its contents. Again, update any life insurance policies you may have to ensure that mortgage obligations can be met in the event of your premature death.
Children. With the pitter-patter of tiny feet comes financial responsibility. If you and your spouse are both working, you may need to plan for child care expenses, or you may perform a cost-benefit analysis to determine whether only one spouse’s income can meet your needs. Update your health and life insurance to include your child, ensure you have adequate coverage, and to add your child as a contingent beneficiary.
If your goal is to fund your child’s education – the sooner the better. Children may also change your estate plan. These critical documents allow you to name a guardian, determine how and who will distribute the child’s assets and update your beneficiary designations if you were to pass away.
Starting Your Own Business. If you choose, starting your own business can be an exciting adventure. As you assume responsibility for establishing, maintaining, and growing your business, be sure to consider the benefits that were previously provided by your employer. It is important to maintain retirement plans and disability, medical, and life insurance coverage as you continue building your financial independence.
Retirement. Retirement is a time to enjoy the fruits of your labor. You will also likely need to consider big lifestyle and financial changes. Will you relocate? How will you spend your extra time? How will you maintain adequate health care coverage? Now you may need to adjust your plan to help preserve your hard-earned assets.
As you approach each of life’s transitions, financial and career planning can help you become financially independent and prepared for whatever life brings your way. Remember to conduct annual checkups to assess your goals, so you can help provide for your loved ones, and build for your future.
For questions about any life stages, not just the ones listed above, schedule a meeting by clicking below, contact Joni Lindquist –firstname.lastname@example.org, or call (913) 345-1881.