By Sarah Stewart Legal Group, PLLC
Generally, people will experience 4 different stages through their lives. Estate and financial planning are important for every stage of our lives. But, certain aspects of planning are more crucial during different stages. Learning what to focus on and when can help you make the best plans possible for your life.
(1) Starter Stage
Budgeting is the most important skill to learn when we are just starting out. A well-planned budget allows individuals to live within their means and avoid getting trapped by credit cards and other debts.
Once the budget is mastered, plan for savings. Start with emergency savings. Inevitably, something important will break. Your car will need new brakes. The hot water heater will go out. The washing machine will flood.
Having an emergency savings of at least $1,000 can stop an emergency from derailing your budget and financial plan.
It is also wise to start putting away some money for retirement. Compounding interest helps early investors get the most bang for their buck. The more you can save the earlier, the better your outcome when you want to retire.
Unless you already have a family, life insurance is not as important at this stage of your life. Put that money to better use elsewhere, like a good health insurance policy. Figure out a basic estate plan in case something were to happen to you.
(2) Family Stage
Once you have a family, in addition to budgeting, saving, and investing, you’ll want to ensure you have a good life insurance policy to cover them if something happens to you. Term life insurance gives you the most coverage for the lowest rates. Add you family to your health coverage.
Start to revise your budget as income and expenses increase. Plan for short-term, mid-range, and long-term financial and personal goals. Find a financial advisor to help you focus on greater retirement investments. If you don’t have an estate plan in place, get one. Your family will be grateful if they need it.
(3) Growth Stage
During this stage of life, your income will increase and your costs will stabilize. Plan to maximize saving and investing during this stage of life. Restructure your retirement plan based on the extra money you can devote to your investments.
Update your insurance policies based on your current needs. Update your estate plan, taking into account marriages, divorces, deaths, births, and other life changes. Consider new estate planning vehicles based on the amount of wealth you have accumulated.
As with all other stages, try to keep your debts as low as possible.
(4) Retirement Stage
The focus of your retirement years will be budgeting. You know how much is available to you and you will have to stay within that range to retire successfully.
Healthcare costs will increase, so invest in a good health insurance option. Debt should be minimal and life insurance will only be critical to protect a spouse or live-in child.
Update your estate planning and financial documents and simplify your finances. Consolidate accounts and organize your financial portfolio.
The best way to plan for each stage of life is to focus on the most crucial financial components during each stage of life. Having a thorough financial and estate plan can help minimize costs and risks for you and your family.
Reach out to professionals today to start your financial and estate plans!