Personal Finances and the Decades of Your Life

Life happens quickly. One minute you are in elementary school and before you know it, you are in mid life crisis. This is the time when many of us look book at past decisions. Did we make good choices or bad ones? Would our life be different if we had married someone else or picked a different career? Where did all my money go? I work hard, I bring home a paycheck every week but there never seems to be enough.

Unfortunately for many of us this is the story of our lives. For some we were never taught how to manage our money and prepare for the future. Others were taught but things just did not work out. Unexpected events like divorce cause many people to divide their assets and start over again. One thing you can not do, which is hard for most of us, is compare yourself to other people. They always seem to have it easier than you do. They get the lucky breaks, they have the pretty wife, and from their life style it is obvious they have money.

Is there anything you can do now that will make life easier as you approach middle age? One thing you can do is plan. Sometimes our plans don’t work out but sometimes they do. Think about where you want to be financially, set goals and figure out what you need to do to make this happen. These rules are not set in stone, for everyone’s situation is different, but each decade of life is a different stage.

The most important thing to do in your twenties is establish credit. One of the best decisions you can make is to decide that you will have a good credit score. A good score determines the amount of interest you pay on loans, how much money you can borrow and can even help you get a job. For a younger person one of the most important things they need to learn is how to manage their credit. Just because a company gives you a certain credit limit does not mean you need to utilize the full amount.

This stage of life is difficult for most people. As children we don’t realize how much money our parents spent to maintain a family. Now it is our responsibility to pay the bills. Most people leave home with very little and have to buy everything they need to setup their first apartment. Students might have college expenses or loans to repay. Now is the time to think about saving a down payment for your first house. If you company offers any type of 401 plan or savings program, sign up. Even if you don’t think you will stay with this company. If you leave you can roll it over to another plan.

The thirties and forties is when most people planning to have children are raising their families. Hopefully your income has gone up since it takes an astronomical amount of money just to raise one child, let alone more than one. Even though it may be difficult, now is the time to seriously start saving money. If you start saving when you are young your money has longer to work for you. If you wait until middle age you have to put in a substantially higher amount to gain the same benefit. Web sites like smartmoney.com/retirement help you calculate how much you will need for retirement and how much you should be saving.

Consider sitting up an Individual Retirement Account, especially a Roth IRA, which has tax advantages and early withdrawal features. If you invest $4,000 a year for 20 years and it averages 8% return annually, you would have about $200,000. For 30 years at the same return it would be approximately $500,000. A small sacrifice today can pay huge dividends in the future. As you approach your fifties, for those with children, there is college to think about.

I think society feels you have arrived when you reach middle age. Your house should be paid for, you should have money in the bank, and you should have a retirement plan in place. Maybe it was like that for our parents but in today’s world this is not always the situation. This is a good time to take a personal and financial inventory. Don’t beat yourself up for the bad choices but rather use these as learning experiences. People today are living longer and many are having two and three different careers. Make needed adjustments and if you have not been saving money now is the time to start. Retirement is just around the corner.

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  1. Money Hacks Carnival #7 Real People Named Hacker Edition | on April 9th, 2008 6:03 am

    [...] Benoit presents Personal Finances and the Decades of Your Life posted at Financial [...]

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