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February 20, 2015

Life Planning for Individuals: Finances, Goals & Milestones


life planningHaving a financial plan and goals is important at every stage in life. As you age and your financial situation in NYC changes, you financial plan will change as well. Life planning takes a long-term approach to setting up your finances to meet goals at every stage of your life.

Life Planning in Your 20's

For most people, financial planning begins in their 20's. Even without realizing it, individuals in their 20's are working towards financial goals. Life planning for those in their 20's includes:

  • Building Credit History: Having good credit plays a role in just about every financial goal. Getting approved for an apartment, receiving the best insurance rates, even getting a cell phone is dependent on having a solid credit rating. Be sure to pay all debts on time each month and take care not to overextend yourself. Only charge what you are able to pay off each month.
  • Start a Savings Plan: Getting into good savings habits early sets the foundation for accumulating wealth. Set up an automatic savings plan to work towards your short-term and long-term goals.
  • Begin Paying Student Loans: If you took on student loans to finance your education you must pay back these obligations. Paying student loans on time helps to build a solid credit history.
  • Plan for Real Estate Investing: Real estate is a way to build wealth and to gain financial independence. Begin to consider if becoming a landlord is something you would be interested in as a way of gaining passive income and building wealth.
  • Gaining Financial Independence: Many life milestones are achieved in your 20's, including finding financial independence from your parents. While staying at home after college can help you save for your financial goals, it also provides a means to help your parents with their expenses.

Life Planning in Your 30's

Adults in their 30's have likely become established in their careers and are thinking about marriage and children, if this has not already happened. This shift in priorities requires a change in life planning. Goals for individuals in their 30's can include:

  • Retirement Savings: After building a foundation in your 20's, it is time to start saving for retirement in earnest. The earlier you start saving, the better off your financial future. Work toward maximizing your 401K or retirement account contributions.
  • Get out of Debt: Many people accumulate debt during their 20's. Make paying off debt a priority, starting with the debt that has the highest interest rate first.  Once that item is paid off, focus your efforts on the next highest interest rate until everything is paid in full.
  • Evaluate your Portfolio: Work with a financial planner to ensure your investments and savings are in mediums that are geared toward building wealth. At this stage, you are able to take on greater risk in order to achieve greater returns.

Life Planning in Your 40's

In your 40's, your financial goals shift to protecting the wealth you’ve accumulated and planning for the future. Things to consider include:

  • Insurance: Having adequate insurance protects your assets in the event of catastrophe. Review your home and auto policies to ensure your level of coverage is adequate to protect your assets. Additionally, take a hard look at your life insurance. Is your coverage amount sufficient to provide income for your family in case you’re no longer around? If not, shop for insurance that provides your family with coverage you’re satisfied with.
  • Investment Risk: Start to make changes to your investment portfolio in order to protect your wealth. While you should still have some risk, transitioning investments to more conservative options is a good idea in order to protect the wealth you’ve accumulated.
  • Eliminate Debt: Pay off debt as quickly as possible, taking care to eliminate any credit card balances. Interest payments add up quickly and can be a drain on cash flows.
  • College Savings: Evaluate your college savings plan and make adjustments as necessary. Now is also to the time to begin educating your children on responsible financial habits.

Life Planning in Your 50's

If you’ve been following a life plan, you are likely to be in a good financial position for retirement. If you’re a little late to the game, fear not. There is still time to get in a good position for retirement.

  • Manage Expenses: Continue to monitor your expenses. Regularly review your expenses to determine if you are getting the most out of your budget. Unregulated spending can thwart even the most comprehensive financial plans.
  • Review Your Investments: Monitor your portfolio on an ongoing basis to ensure that your level of risk is appropriate given your age. At this point, you should be in less risky investments to ensure your money is available when you retire in a few years.
  • Maximize Savings: As you get older, the IRS allows for larger contributions to retirement accounts. Save as much money as possible to prepare for your retirement.

Life Planning in Your 60's and Beyond

You’ve made it to retirement or are getting close. Your focus should be on managing your retirement savings in order to live your best life.

  • Budget: Living on a fixed income does not mean spending no money. However, it is important to build, and then stick to, a budget. Monitor your expenses regularly to ensure your spending is in line with your income.
  • Estate Planning: If you have not already done so, now is the time to establish and estate plan. Creating an estate plan ensures your assets will be distributed in the way you desire upon your passing. While it may be unpleasant to think about, failing to estate plan can result in an undue tax burden and a reduction of the wealth you’ve worked so hard to accumulate.

Setting up a life plan in NYC can be complicated. A certified financial planner can assist with building a life plan that will grow with you. Even if you begin your financial plan later in life, it is possible to achieve your financial goals.

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