Which “Savings and Growth Stage” Are You In?As life changes, your needs and priorities change, too. This is also true with money. For most people, savings goals change throughout their lives. For example, early in your career, you may not have much money left once all the bills are paid. With limited funds, you might focus on growing your basic savings account, in case of emergencies. Once your income increases, you may have more choices. Later in life, when you are looking to retire, your goals might shift again. At that point, many people begin to look at protecting the money they have worked hard to save. Your stage of life can impact your choice on the best way to grow and save money for your family.
Tips For Early Stage SaversAlthough not everyone has the same income, lifestyle, or expenses, there are a few basic ideas that can help many people in this start-up phase of savings. First, make a budget. Sounds simple enough. Yet, many people don’t have one. Just start by making a list of all your essential expenses. Think about must-haves like food, housing, and utilities. Then, write down any additional monthly required expenses such as car insurance, medical co-pays or expenses, household items, and clothing. Next, mark down any monthly debt payments you may have. (For example, cars, student loans, personal loans, etc.) Note: If you have any expenses that are paid quarterly or annually, do the math to convert them into monthly amounts. As an example, a $600 quarterly water bill becomes a $200/month expense because $600/3 months = $200/month.
Once you’ve got an accurate list of all your monthly expenses, it’s time to list your income. Using your net pay (that’s after taxes and other withdrawals), write down the total you get each month. If you are self-employed, or if your income tends to go up and down each month, base your budget on your lower average income. That way, you can save any “extra” for the months when your income is below average. Finally, subtract your expenses from your income. What is left is your available savings.
After you’ve made a budget and know your available savings number, its time to build up your basic emergency account. Most people use a regular savings account for this, but some also choose a money market account with checking writing privileges. The idea is to have enough money to be able to handle emergencies without going into debt. When your budget is complete, and your basic savings goals are met, you are now ready to begin saving for your future.
Mid-Stage Savers: Best Way To Grow and Save MoneyIn this phase of financial savings, people usually begin investing and saving for retirement. Using accounts such as 401(k)’s, IRA’s, and other investment vehicles, mid-stage earners’ focus is typically on trying to grow their money. Because there are so many choices to make in deciding where to invest your money, it is important to make sure you’re working with the right type of qualified financial advisor to help. The person you seek advice from for investing purposes should be securities licensed. You must understand the risks associated with any investments you make. In addition, some people also choose to learn more about insurance products during this time, such as life or disability insurance. These products may help to protect the household income via a death benefit in the event that the income earner(s) pass away. For insurance products, you should seek out a licensed insurance professional.
For many people, mid-stage savings involves investing for the long term. In mid-stage, most people feel they have time on their side. Although the stock market carries risk and sees many ups and downs, many people decide to ride the waves of the market during this stage. Their goal is to have long-term overall growth. This, of course, is not guaranteed. However, the key is to have a qualified investment advisor on your side, understand the risks, and make a plan. In addition, you want to make sure you’re also sticking to your budget and maintaining your emergency savings.
When Retirement Is In SightAfter your money has reached a certain dollar amount, you may begin to think about changing your savings goals to prepare for retirement. For most people, this begins to occur around 5-10 years before they plan to retire. Although the ups and downs of the market may have been acceptable during their earlier working years, some pre-retirees begin to think more about protecting their money from market dips. They want their principal protected from a bear market or from the possibility of a stock market crash.
Certain annuities and life insurance products may be something to consider as you approach retirement. Fixed index annuities, for example, may offer you the ability to obtain a reasonable rate of return, while still protecting your principal from losses. In addition, you may choose to have your annuity provide you with income when you reach retirement. Be sure to speak with a qualified and licensed insurance advisor to find out more about your annuity and life insurance options.
Best Way To Grow and Save Money In RetirementIn retirement, your savings goals are likely to change yet again. Many retirees are wanting to make sure that their money lasts their whole lifetime. In addition, you may want to learn about options for leaving a legacy. This may include ways to pass on your money to your beneficiaries or ideas for how to make sure your spouse still has a retirement income should you die before them. Although budgeting and maintaining liquid assets is still important in this stage, you may look to change strategies in order to protect your money from losses.
One way to gather information about ways to protect your retirement savings is to attend educational seminars. Our firm, Retallick Financial Group, provides complimentary dinner seminars several times per year. At these events, we help those who are near or in retirement to learn about how the stock market may impact their current accounts. Also, we discuss options for protecting your money. To register for these events, please contact us.