Finding the Balance So You Can Achieve Your Goals From Your 30s Through Your 60s
“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” This quote from the popular 80s movie, Ferris Bueller’s Day Off, is a good reminder to stop and smell the roses, but it is also relevant to financial planning. Consider the scenario: A young couple falls in love in college and decides to get married shortly after graduation. Everything is new and exciting. Maybe they purchase a condo or a starter home, and each begins working in their chosen field. They are very busy putting in the long hours that many do to establish their career. The weeks are filled with work and the weekends seem to blend into each other, but things are going great. They agree that it’s time to start a family. Babies come along, and so do more bills. They adjust their finances to either pay for childcare or accommodate for one parent staying home with the kids. They talk about building their savings and starting college funds for the kids, but it seems as if each day brings a new challenge that requires their attention or money, and they never get around to opening the accounts. Sleepless nights roll into busy days and before they know it, years have passed. They look back and wonder, where did the time go?
Many of us have been in a situation like this. Whether it involves starting a family or deeply committing our time and energy to a career, it can feel like the days and years go by so quickly that, when we pause to reflect, we find that some of the things we wanted to accomplish have slipped through our grasp. That’s why when it comes to managing our finances, we have to prioritize planning for tomorrow, while we take care of today’s needs.
What do you want to achieve?
How can you make choices today that support your current goals while also building a secure financial future? While individual circumstances will dictate resources and how much time you have to accomplish your dreams, it’s important to create a financial plan that will help you navigate every stage of life.
Starting Out in Your 30s
This can feel like a challenging time to think about saving for the future. Expenses can be high, and salaries may be lower, but it is also one of the most important periods in life to start planning for tomorrow. The longer you save and invest, the more your money can grow over time. Here are some steps you can take to start developing long-term financial security:
- Analyze your needs and resources. Then create a budget. Think about how you are spending your money. Are you paying expensive rent while trying to save a large downpayment for a house? Would you be better off buying a less expensive townhouse or condo in a good location? It may not be the four bedroom house you were dreaming of, but it can allow you to begin building equity. Do you and your partner each drive newer cars but one of you commutes to the city by train each day? Can you part with one of the newer vehicles and replace it with an older, paid off “station” car? Take an afternoon and look at your bills. Even smaller expenses can add up and those funds might be put to better use. Are you eating out frequently? Do you have multiple streaming services that you barely use? How about that gym membership? Are you still going? You may find that you can cut back on what you spend each month and put that money into a future with financial security.
- Grow your emergency fund. An ideal goal is to set aside between three to six months’ worth of essential living expenses. Those who are self-employed with fluctuating income or families with children may want to aim for six months or more. The most important thing is that you start building the savings in this account now so that you’re prepared for unexpected events like an illness, job loss, or a sudden expense – such as replacing a broken refrigerator. Having easily accessible savings ensures that you can cover your bills in an emergency situation and stay on track financially.
- Begin saving for retirement. By starting your retirement savings now, you will have the power of compound interest on your side. You can aim for a goal of saving 15% of your earnings, but you can start with as little as 5% or 10%. Retirement savings are a key element of a secure financial future, so it is vital to plan for this in your monthly budget.
- Review your insurance coverage and purchase any additional policies you may need. Ensure that you have adequate coverage provided in your auto and homeowners or renters insurance policies. Additionally, add a long-term disability insurance plan, which will replace a portion of your income if you are unable to work due to injury or illness. Now is also the ideal time to purchase life insurance, especially if you have a spouse or children. Your rates will be lower than if you wait until you are older, and you and your loved ones will have peace of mind that if something should happen to you, they will be financially protected.
- Establish or update an estate plan. Although you can begin drafting estate planning documents the moment you become eighteen, many people don’t turn their attention to this task until much later. An estate plan may include a last will and testament, a trust or trusts, a financial power of attorney, health care proxy, living will, beneficiary designations and a last letter of instruction. These documents protect you and your loved ones in a variety of situations. A financial advisor can review your specific family dynamics and financial resources and explain the different estate planning documents that would best suit your needs.
Aging Into Your 40s
Working hard in your thirties can bring you to a level of comfort and accomplishment in your forties. You might be enjoying success in your career and reflecting on what you may want in your future. If you have children, they may be developing their own dreams and thinking about college. Maybe you have aging parents who you plan to help. How will you accomplish this? And is this the time you should move into the dream house you’ve always wanted? Or should you make a few upgrades to your current home so that you can age in place and save yourself from the expense of lifestyle creep? Most of all, you want to continue balancing your future financial needs with what you want out of your life today. Here are some key things to consider in your forties:
- What do your priorities look like now? Are you satisfied with your career? Do you anticipate staying the course until you are ready to retire? Or have you been thinking about a change? Maybe you want to work for a different employer or switch to a different field altogether. A financial advisor can help you assess the impact of any changes you are considering and create a plan that will keep you on track to meet your goals.
- Open a dialogue about finances with your aging parents. Your parents may need your financial assistance as they get older. They may not want to have this conversation, but it’s important to assess what ability they will have to provide for their own care and to determine how you may help, as this will need to be accounted for in your financial plan.
- It’s time to talk about college. There are many routes your children may take after graduating from high school, but if college is in their plans, you need to discuss how it will be paid for. It can be helpful to sit down with your kids and to explore the different options they may be thinking about and break down the costs. Are you planning to pay for all of their education expenses? Will you be contributing a portion and expecting them to make up the difference with student loans? Are you financially secure for retirement? It’s important for you to consider the impact it will have on your future if you plan to pay for some, or all, of the cost.
- Review your investment strategy. Are your investments in line with your risk tolerance and to meet your goals? Are your assets in the right accounts for tax purposes? Are you diversified and properly allocated. Your advisor can review these with you and help you to make any necessary adjustments.
- Budget for fun. Do you want to travel or try new hobbies? Your forties can be an exciting time when you get to explore some of the things that you’ve always wanted to do. You can create a separate “fun money” savings account and tuck away a small amount of each paycheck so that when you decide you want to book a vacation, the money is available. The key is to fund this account over time while staying on track with all of your other goals.
- Review your estate plan. When you create an estate plan, you are working with your life circumstances as they are at that time. However, you should make it a point to review your documents every three to five years to ensure that they still reflect your wishes. Additionally, milestone events in life may require updating your plan. This might include marriage, divorce, purchase of real estate, new investment accounts, the birth of children or grandchildren, or inheriting money. A financial advisor can help you review and update your documents as needed.
Entering Your 50s and 60s
This phase of life can be enjoyable and fulfilling, but it may also bring about many changes. Empty nests, retirement, caring for elderly parents, and facing our own health challenges can be stressful if we don’t prepare for this time of transition.
- What are your plans for retirement? Do you have an age in mind for when you will retire? Are your savings on track to facilitate that? Or do you need to become more proactive now while you are still working? Have you thought about what you will do with your time and where you will live? Whether you envision an active lifestyle of volunteer work and travel, or you want to explore hobbies and spend time with your family, a large part of a happy retirement is ensuring that you have the financial resources to support your dreams. Speaking with a financial advisor can be an excellent way to see if you would benefit from making any adjustments to your financial plan.
- Will you become a parent caregiver? As parents age, their need for assistance will likely increase. What will their living arrangements look like? Will they be able to live in their home alone or with the help of a personal care aide? Will they need to move to an assisted living facility? Or will they possibly move in with you? This also might mean you will dedicate time to bringing them to appointments and serving as their advocate. You will want to ensure that they have all of their estate planning documents in order so that you will have the legal right to speak on their behalf should they become unable. Discuss the different scenarios with your parents to learn what they want, and to determine how you will best be able to help.
- Update your investment strategy. As goals and priorities change, your investments need to be reviewed as well to ensure they are in line. Accumulation and distribution portfolios may be constructed differently. Ensure that all continues to be customized to your unique needs.
- Plan for your own health care needs as you get older. Eating right, exercising, and reducing stress as much as possible are good habits to have. Yet, even when we take all the recommended steps to support good health, we cannot know for certain what health conditions we may eventually face. By maintaining comprehensive health insurance and saving money for out-of-pocket costs like copays and deductibles, you can be prepared to address your health needs as they arise. In addition, you may want to consider purchasing a long-term care insurance policy. Premiums will typically be lower when you are in this age group. As you enter your 60s, it’s a good idea to start reviewing the rules and coverage options you will have with Medicare, as this is the medical insurance most Americans 65 and older have.
While you may find that your journey is full of unexpected twists and turns, you can still set goals and create actionable plans that can help you achieve your dreams – even as they evolve. Whether your goal is to grow a successful career and retire early or raise a family while saving for both college and a comfortable retirement, there are financial steps you can take along the way to build a foundation for success in every stage of your life. Please feel free to contact us if you have any questions.
