In the “early years”, your 20s and 30s, you are at the start of your working career and have a list full of firsts. This may be your first real job, your first apartment and your first steps toward financial freedom. You are finally in the work force and earning more money than ever before! On the flip side, you may also have more expenses than you’ve ever had. Juggling student loans, car payments, credit card bills and living expenses can be a real challenge. On top of that, you also have a “wish list”— those things you wish you could afford. By learning how to manage your money early in your career, you can develop skills that will pay off for the rest of your life.
Step One: Pay Yourself First
Most importantly, contribute to your company’s retirement plan. Consider giving up a small sacrifice like 1 candy bar per day and you could save an additional $365 annually. Compound this over 30 years at 6% annually and you could have an additional $28,856 to invest in retirement.
In the “busy years”, your 30s and 50s, you are buying a home, raising a family, advancing in your career and hopefully managing your money. Knowing how to do this effectively will help you accomplish the many goals on your financial plate, including saving or paying for college, saving for retirement, keeping your debts under control and starting to plan your estate.
Step Two: Manage & Monitor Your Net Worth
Consider giving up a small sacrifice like 1 movie ticket per week and you could save an additional $520 annually. Compound this over 20 years at 6% annually and you could have an additional $19,743 to invest in retirement.
In the “pre-retirement years”, your 50s and 60s, you are in a time of transition. You’re established in your career, you have a good handle on your financial responsibilities and you’ve accomplished many goals. However, one of your most important goals is still on the horizon—your retirement. As you near retirement you will need to manage your money, invest for your future, control your taxes, and possibly, plan your legacy.
Step Three: Calculate Your Retirement Savings
Are you on track to meet your goals? Consider increasing your retirement contributions by sacrificing eating out twice each month. This could provide an additional $1,440 in retirement savings each year. Those dollars compounded annually, at a rate of 6% over 15 years, could add an extra $34,597 to your retirement savings.
In the “retirement years”, you’ve reached the magic age. Whether you’re already retired or are just thinking about it, your life is changing. Retirement can be a rewarding and fulfilling time of life. To make the most of the years ahead, you’ll need some new financial management skills. Successfully managing your money in retirement, investing for today and for the future, keeping taxes at a minimum and securing your legacy are paramount to enjoying carefree golden years.
No matter what your age or stage of life is, it's important to build a sound financial ladder so that you can reach your future goal of a financially secure retirement!