While everyone’s situation is different due to factors like income, expenses, location and goals, we all should be thinking about our personal finances. By thinking strategically about your investments during each stage of life, you can hopefully retire comfortably. Discover the top ways to save money and start preparing for the future today.
Saving Money as a Young Adult
Age 25-35: Now that you’ve graduated from college, hopefully landed your first real job, and maybe even got married, personal finance should be high on list of priorities. Your goals might be paying off debt, saving for a down payment on a home, or even establishing a college fund for your children, and/or putting away funds for retirement.
If you don’t start saving for retirement today, then when will you?
Saving for Retirement: 401ks, Annuities and Mutual Funds
One of the top saving money tips out there is to start saving for retirement as soon as possible. A good investment goal at this stage of life is to put approximately 10 percent of your income toward retirement, and to even increase the amount you save whenever you receive a raise. Now’s the time to take advantage of your employer-sponsored 401(k), or start an individual Retirement Account (IRA). Investing in your 20s can give you greater peace of mind in your 30s and beyond because more time in the market means investment returns compound longer. If you only put a small amount of money into these accounts, you’ll get into the habit of saving and may benefit from compounded interest.
If you’re a parent at this age, it’s never too early to start instilling monetary values in your children, too. Plus, it’s a good reminder to keep your financial goals in check. While small children might not grasp the idea of budgeting and savings, they can benefit from practicing the habits of self-control. Here’s some quick tips for children and teenagers:
Children: Make your children think about the idea of buying now vs. saving for later. Consider the situation of buying something small today, or wait until they have enough money for the larger item they want in the future.
Teens and young adult years: This is the stage that teenagers and young adults start making their first “real” financial decisions – what to do with money from a first job or how to choose a first car. These are great opportunities for them to learn ways to save money, and a reminder for parents to “walk-the-walk and talk-the-talk.” Ask questions about who’s going to pay for gas, the cellphone, and auto insurance?
Saving Money at Middle Age
Age 35-55: These are the peak earning years when you should be ramping up your retirement savings. While saving for your children’s college education becomes a higher priority or wanting to buy a bigger house, this is the time when your nest egg can really grow. By this age, you’ll likely be bringing home a larger paycheck, and may even benefit from bonuses or inheritance that can contribute to the size of your investments. You should be saving 10 to 20 percent of your income and still have 10 to 15 more years of earnings.
Here are some other money saving tips to get you on track for retirement at middle age:
Consider downsizing. While a bigger house seems ideal, downsizing might be your best move. Your housing cost might be one of the largest expenses for those in retirement. A condo or townhome might be much more affordable than the five-bedroom house where you raised your children but now is empty.
This goes for your vehicle, too. You may not need the gas guzzler anymore, but rather something smaller and more efficient.
Age 55 – retirement: If you’re in your 50s and 60s your thoughts are probably turning toward retirement. You may be asking yourself, when should I retire? How much money do I need to retire? According to the Social Security Administration on average a man who is 65 now, can expect to live until 84.3 and a woman at 65 today, can expect to live until 86.6. Your retirement planning needs to factor in the possibility of a substantially longer life than past generations.
Now’s the perfect time to create a spreadsheet for what you’ve got and what you need. Draw up an ideal budget of everything that you spend now, and then do the same for your retired self. Consider the expenses you won’t incur when you’re not working, but also think about what you might want to spend more on such as traveling.
Whether retirement is near or far away, few of us head into retirement expecting the worst. But sometimes it happens. Prepare for the unexpected now, and you won’t get caught off guard later. Discuss the big financial issues with your family or those closest to you.
You probably have an idea of how you’d like to spend retirement. Whether you’re just starting out, nearing middle age or getting close to retiring, now’s the time to be financially intelligent. Speak with your local Farm Bureau Agent about discussing your future financial opportunities.