{"id":312,"date":"2022-04-01T13:59:19","date_gmt":"2022-04-01T13:59:19","guid":{"rendered":"http:\/\/www.1engineeronfire.com\/?p=312"},"modified":"2022-04-01T14:00:29","modified_gmt":"2022-04-01T14:00:29","slug":"financial-advice-for-different-life-stages","status":"publish","type":"post","link":"https:\/\/www.1engineeronfire.com\/?p=312","title":{"rendered":"Financial Advice for Different Life Stages"},"content":{"rendered":"\n

Financial Advice for Different Life Stages<\/strong><\/p>\n\n\n\n

On my birth date my father opened a savings account in my name with $100.  I can honestly say I have been investing my whole life!  I invested in myself, my marriage, my career, and my portfolio.  Having a clear plan and being on track gives you confidence.  That confidence must be perceivable to others as people have often asked my advice on a number of topics.  I\u2019ve made mistakes along the way but I\u2019m hoping some of that advice might just help you to avoid those mistakes\ud83d\ude0a.<\/p>\n\n\n\n

First Earned Money<\/strong><\/p>\n\n\n\n

For a grade school aged child with an allowance or birthday cash I suggest the following: Create a 5 envelope system as follows: 1) Savings 20%, 2) Long term goal 20%, 3) Short term goal 25%, 4) Church 10%, 5) Spending money 25%.  Open a savings account and once the savings reaches a reasonable amount have the child physically hand the money over to a bank teller.  Go to church and let the child place their own money in the offering plate.  Let them spend their spending money on whatever silly thing they want.  See my post about Teaching Kids About Money https:\/\/www.1engineeronfire.com\/?p=173<\/a><\/p>\n\n\n\n

High School Graduate<\/strong><\/p>\n\n\n\n

Assuming you have a job and money of your own first create your attitude money<\/strong> \/ emergency fund.  For starters $1,000 will do but $5,000 with do a lot to improve your attitude\ud83d\ude0a.  Continue to use the principles of the envelope system.  Change the savings rates to focus on college savings and minimize spending.  Your primary goal here is to invest in yourself<\/strong>.  I might suggest 1) Savings 5%, 2&3) Combining long and short-term savings into college expenses 75%, 4) Church 10% and 5) Spending money 10%.  Open an investment account with Vanguard or Fidelity and at the very least get it started with the minimum.  Pick a local in-state university or trade school and live at home or with family.  Do not go into huge student debt, go to work every hour you are not working on your studies.  Graduate from school debt free!<\/p>\n\n\n\n

College Graduate<\/strong><\/p>\n\n\n\n

Do not fall for the common financial traps of new job hires.  Don\u2019t buy a new car, don\u2019t over spend on a fancy apartment, clothes, vacations.  Yes, all your friends are doing it but they are broke and will continue to be.  You are better than that and will soon be financially years ahead of your friends.  Create a detailed budget https:\/\/www.1engineeronfire.com\/?p=306<\/a> and put a priority on investing https:\/\/www.1engineeronfire.com\/?p=302<\/a> so you pay yourself first<\/strong>.  Learn about your employer\u2019s 401-k and health care savings plans.  Keep living like a broke college kid, you are used to it!  Get the maximum match of your employer\u2019s plan and invest every extra penny in low fee index funds.  Thank your parents for all their help getting you this far\ud83d\ude0a<\/p>\n\n\n\n

Getting Engaged \/ Married<\/strong><\/p>\n\n\n\n

Choose carefully!  Your partner should be compatible not only socially but financially as well.  A spender and saver do not mix!  You both need common life goals.  You are not only getting a spouse you are getting their whole family\u2026forever!  Don\u2019t overspend on a silly engagement ring to impress other people.  The same goes for the wedding.  Have a nice party but stay within your budget with the cash you saved in advance. <\/p>\n\n\n\n

Once you are married you need life insurance.  Find a low-cost term policy if your employer\u2019s policy is inadequate.  Create an estate plan including trust, will medical and legal powers of attorney.  These documents are not just for the wealthy they are for all responsible adults. Work together<\/strong> to create and follow a shared detailed budget.  Budget a little spending money for each of you with no strings attached.  No matter how small include an entertainment item in your budget.  Review your budget regularly, openly and together!  Calculate your FI number https:\/\/www.1engineeronfire.com\/?p=306<\/a>.  and make a savings and investing plan and stick to it.<\/p>\n\n\n\n

First Time Home Buyer<\/strong><\/p>\n\n\n\n

I live in the Midwest and a house and car are virtual necessities.  I get that a condo or apartment in a big city appeals to many.  Either way you need a place to live.  Set a home purchase price based on your monthly budget and do not buy more house than you can afford (Max 25% of monthly take home).  Have at least a down payment of 20% and an emergency fund of 6 months expenses before you even start looking.  Shop for a 15-year mortgage<\/strong>. <\/p>\n\n\n\n

Better to have the small house in a nice neighborhood than a big house in an average neighborhood.  Your perfect house at age 28 looks nothing like your perfect house at age 50, you will move someday.  However carefully you budgeted home ownership, you missed something\ud83d\ude0a.  Modify your budget accordingly.  Your need for life insurance may increase. Your estate plan will need updating.  If this sounds expensive it is!  But with a paid off mortgage, you can accelerate your investing and lower your FI number as your retirement housing cost will be very low.<\/p>\n\n\n\n

Middle Age \/ Peak Earning Years<\/strong><\/p>\n\n\n\n

You should have found your life balance somewhere between minimalism and extravagance.  Your portfolio should be on track to reach your FI number.  It is critical you resist trying to keep up with the Jones\u2019s.  The Jones\u2019s are broke<\/strong>, only neither you or they know it!  If you are debt free you can enjoy life a bit more but stay on budget. Keep vacations, cars and other expenses in check.  Just because you can get a loan for that sports car doesn\u2019t mean you should!  Paying cash for everything keeps your spending and savings in check.<\/p>\n\n\n\n

Accelerate<\/strong> your investing and make sure the kid\u2019s college funds are on track.  If your income is sufficiently over your budget consider increasing your giving.  Revisit your life insurance as policy\u2019s may have run out or you may need changes.  Review your estate plan. <\/p>\n\n\n\n

Preparing for Retirement<\/strong><\/p>\n\n\n\n

Your FI number is in sight or you\u2019ve already made it.  Further investing is frosting on the cake.  When the money is really flowing it\u2019s easy to slack off on your budget and now is the time to really dial it in.  It\u2019s time to count every dollar like when you were starting out.  I suggest performing an almost forensic accounting of your last 2 years of spending.  This will give you complete confidence in your retirement budget. I would even consider categorizing items into Must have or Nice to have.  This way you\u2019ll know exactly what you can cut in a market downturn.  Recalculate your FI number https:\/\/www.1engineeronfire.com\/?p=306<\/a>.  Plan your upcoming lifestyle changes by reading \u201cYou Can Retire Sooner Than You Think\u201d<\/em> and Confirm your FI number calculations by reading \u201cCan I Retire Yet\u201d<\/em> https:\/\/www.1engineeronfire.com\/?p=232<\/a>.  You now should be self-insured and may not need life insurance, adjust as necessary.  Consider your portfolio asset allocation and future withdrawal strategy https:\/\/www.1engineeronfire.com\/?p=73<\/a>.  Make sure your health care coverage is in place.  Consider setting up a charitable giving legacy.  Investigate long term health care insurance.  And once again review your estate plan.<\/p>\n\n\n\n

Retirement<\/strong><\/p>\n\n\n\n

Congratulations you made it!  With all your planning, the decision will be easy and stress free.  I suggest a quarterly withdrawal strategy.  This will keep you in tune with your investments and budget as you work out any minor adjustments.  Hopefully in a year you can give yourself a raise.  After a few years, and you have proven your plan is bullet proof, move to an automated monthly withdrawal.  Fully enjoy your new lifestyle activities and giving back.  Plan every day ahead of time so the time does not slip away.  Of course, review and update your estate plan.  Start a business, volunteer, travel, spend time with the grand kids or maybe even start a blog\ud83d\ude0a<\/p>\n\n\n\n

1EngineerOnFIRE<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Financial Advice for Different Life Stages On my birth date my father opened a savings account in my name with $100.  I can honestly say I have been investing my whole life!  I invested in myself, my marriage, my career, and my portfolio.  Having a clear plan and being on track gives you confidence.  That […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"WB4WB4WP_MODE":"","WB4WP_PAGE_SCRIPTS":"","WB4WP_PAGE_STYLES":"","WB4WP_PAGE_FONTS":"","WB4WP_PAGE_HEADER":"","WB4WP_PAGE_FOOTER":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[22,1],"tags":[24],"class_list":["post-312","post","type-post","status-publish","format-standard","hentry","category-investing","category-uncategorized","tag-financial-advice"],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/posts\/312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=312"}],"version-history":[{"count":1,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/posts\/312\/revisions"}],"predecessor-version":[{"id":313,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=\/wp\/v2\/posts\/312\/revisions\/313"}],"wp:attachment":[{"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.1engineeronfire.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}