A Financial Plan For Life
Take a moment to reflect…. What big events happened
in the last 12 months? Did you welcome a baby into the world or buy
your dream home? And what changes does this year hold? Will you send
a child to college or look for a new job?
Or maybe, life's just status quo….
Big life events or not, now is an excellent time to take
stock of your life-and your finances. Because as your life changes,
so should your finances.
Different Life Stages, Different Financial Strategies
Every major life change-a new home, a baby, retirement-has a big impact
on your financial picture. Knowing what to expect and planning ahead
can help keep your finances on track. So, consider these tips as you
experience the following common life events….
Your First Job
You've landed your first professional job and just received your first
paycheck…. Retirement is probably the furthest thing from your
mind right now, but it's time to begin saving for it. Make it a habit
to contribute to a retirement plan each month. If you get to choose
how your money will be invested, select growth investments and make
sure your portfolio is balanced. You should also start building up a
cash reserve for emergencies. Even if you set aside just $50 a month,
it's a valuable start.
The New Couple
Once you've walked down the aisle, sit down with your spouse and review
your new combined financial picture. Start by comparing your individual
investments, reviewing debts either of you owe and evaluating your retirement
plan options. Next, set financial goals. Then, make adjustments so that
your financial strategies are on target with your goals.
If one of those goals is to buy a new home, put a pencil
to paper before you begin house hunting. Figure out how much you can
afford in monthly mortgage payments and factor in the down payment,
closing costs and moving expenses. Consider funding these last three
costs by investing some of your non-retirement savings in a short-term
investment vehicle.
Family Time
A baby's arrival changes everything-including your financial plan. So
start planning before you have children. Evaluate how expenses like
childcare, medical bills and all of the baby's other needs will impact
your monthly budget. Then live within your revised budget before your
baby arrives to get comfortable with your new financial arrangement.
One of the most important things you can do when you have
children is to start a college fund. According to the College Board,
college costs have increased an average of five percent per year for
the last five years. If college costs continue to increase at that rate
for the next 18 years, four years at a private university could cost
over $200,000. Don't let the numbers scare you-an early start and consistent
saving will help you reach the goal.
Your Golden Years
As your children graduate and move out of the house, increase your retirement
contributions. And don't shy away from risk at this point. Having some
portion of your investments in stocks will help offset the effects of
inflation. When you're ready to retire, work with your financial advisor
to determine the best way to access your retirement savings.
Financial Rules to Live By
Maximize your investments and keep your financial plan on track by following
these practices throughout life's stages.
Review Your Finances Regularly
Even with the best planning and diligent investing you can veer off
track if you don't review your financial plan regularly. Meet with your
financial advisor annually to evaluate your finances and your goals.
Factor in Inflation
If you're not careful, inflation can slowly whittle away at the value
of your nest egg. To compensate for inflation, consider investing some
portion of your portfolio in stocks.
Use the Power of Time
Time is money-in more ways than one. Remember that it's never too late
to start saving for retirement. If you haven't started, do so now. Time
is also an offsetting factor to risk, which means that you can tolerate
more risk in your investments if you have more time to make up any losses
you may incur.
An Outstanding Financial Opportunity
MSBA can help protect your assets from unexpected expenses. To further
investigate your options with MSBA-sponsored insurance plans, call toll-free
1-800-501-5776.
Source: Trends in College Pricing 1998, The College Board
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Last Updated 9/28/03 -
