Whether you are a teenager or about to retire, it is important that you are able to manage your money effectively. Although your financial goals may be different as you get older, it is never too early or too late to learn and master sound fiscal habits.
Let’s take a look at some common financial goals and how you can achieve them.
Financial Goals for Teenagers
As a teenager, you may be entering the workforce for the first time and slowly starting to gain your financial independence. Between the ages of 14-19, you are most likely trying to save for your own car, save money for school or perhaps gather up enough money to go on a summer road trip.
How can you achieve those goals? As you don’t have much debt and your parents may provide your other needs, you should save as much of your paycheck as possible. If you can, put your money into an index mutual fund or other safe stocks that can give you a return of anywhere between 2 and 10 percent annually.
Financial Goals for Early Adulthood
Those between the ages of 20-40 are typically trying to establish themselves both financially and professionally. Financial goals may include paying off student loan debt, saving enough for a wedding and buying a home. The easiest way to reach these goals is to avoid as much debt as possible. If you have paid off your car, drive it for as long as possible.
Find an affordable apartment that you can share with your girlfriend/boyfriend someone who you can tolerate living with for a few years to help you build your savings. Those who are interested in buying a home should look into first-time buyer programs that offer low rates and down payment assistance.
Any bonuses or raises at work should go into a fund dedicated to making extra debt payments or to saving for a home or wedding. If at all possible, start saving for retirement as you will enjoy greater compounding of your contributions. Ask your employer to match your 401k contributions as that equals a guaranteed 100 percent return on your investment.
Financial Goals Heading Into Retirement
After you hit 40, you are less likely to significantly increase your earning potential. Therefore, this is the time to evaluate your current debt load, your future financial goals and your plan for retirement.
Now is the time to start putting the maximum $5,000 a year into your IRA and the maximum $1,000 catch-up amount if you are over 50. Once you hit 50, do not plan on accruing additional debt. Furthermore, make sure that you can pay off your home and other current major debts before age 60 to allow for a financial cushion as you enter the last few years of your working life.
Financial Goals for Retirement
Although you may have stopped working, you still want to stay on top of your finances. Make sure that your investment portfolio is diversified and that you have an estate plan drawn up. Having an estate plan allows you to name a trusted executor to manage your assets if you become mentally incapacitated. You should also have a life insurance policy and enough money set aside to pay for medical expenses as they arise.
Regardless of how old you are, having sufficient income and savings will allow you to live life on your own terms. By keeping a diversified investment portfolio, you will gain wealth at a rate higher than inflation, which will allow you to buy that home or retire early.
By maintaining good financial health, you are better able to manage your mental and physical health and live a long and productive life.
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