How to Financially Prepare for Post-Pandemic Life

As the dust slowly begins to settle and we observe businesses putting their action plans in place to recover, we all sit and wonder what this may look like for us. How will I recover from this? How am I going to cover these unexpected expenses? How will I increase my earning potential? Whether you’re navigating the muddy waters of being unemployed, furloughed, return to office plans or continue working remotely – we have many things to consider as time continues to quickly progress. How should we handle debt? Are there any more relief programs or funding? How can we pick up the pieces and properly recuperate what may have been lost? Use the tips below to jumpstart your journey of reclaiming your finances.

Identify your financial focuses

Over the course of this year, many financial goals that were initially set needed to be tweaked or came to a screeching halt altogether. While it would be nice if we could rectify the many financial aspirations we have for ourselves and our families all at once, it’s simply not realistic. To alleviate the impounding pressure many have had to experience for a good chunk of time this year, it’s best to identify two to three key areas of focus. Not only does narrowing your focus help direct where your efforts should lie, it removes unnecessary stress so that a plan of attack can be created and executed upon. For example, if you would like to begin rebuilding your emergency fund, savings or simply get caught up on bills and other overhead expenses – make sure the actionable steps you take align with the overarching goal. This helps create tunnel vision to execute on the goal while quieting the noise of things that can be tackled at a later time. You owe it to yourself and your finances to see these goals through to the finish line.

Revisit your budget and make adjustments as necessary

Many think of budgeting like that pesky chore you put off every single week. It’s that ‘thing’ you know needs to be done, but you always find something else to do instead. However, once it’s done – you’re always glad that you did it. Even if you have to have an adult temper tantrum, pull out the pen and paper (once again) to compare your income with expenses. Has your income increased or decreased? Are there expenses that are no longer on the list? Are there certain wants or luxuries that can be temporarily put on hold until things settle down? Take all of these factors into consideration when recalibrating your budget. Since there’s an increased amount of time indoors, are there any spending habits you’ve noticed that have been on the rise? If these questions are not easily answered, commit to reviewing the last few months of your bank statements. Do you notice more to-go food orders? An increased amount of emotional or impulsive purchases? Be honest with yourself and your habits so that you can address and make changes to healthily rebuild your finances.

Adjust debt payoff plan

If you haven’t taken the opportunity to contact your creditors – consider this as a reminder! It’s imperative you maintain an open line of communication with all lenders. These conversations can potentially lead to various options being available to assist you in your debt payoff process. Remember to keep in mind that you are not the only person experiencing financial hardship, so let pride become a thing of the past and be candid. Are there relief options during the pandemic? Are interest rates being lowered because of the current climate? If I were to miss a payment, what are the consequences? Are negative remarks being reported to the credit bureaus? Be very clear in your delivery. There are thousands and thousands of people attempting to pick up the pieces on their money journey. Take some time to check all creditor accounts for the most recent balances. From there, create (or readjust) your plan based on your personal circumstances. If it’s easier to tackle the smallest debt, shift your attention to those accounts. If catching up and restoring good standing with utilities and other overhead expenses need to be addressed first, do that. There is no right or wrong way to approach your plan; just don’t adopt the spirit of avoidance.

Monitor your credit score regularly

There’s been a huge surge in personal data being compromised due to the pandemic. To protect yourself and your credit score, be sure to obtain a copy of your credit report from at least one of the bureaus (Experian, TransUnion and Equifax) and review regularly. Normally, you are allotted one free credit report every year – however, because of the pandemic you can now request your report weekly at no cost to you until April 2021. We all know there’s a lot on all of our plates, but this can be incorporated in your weekly routine to make sure information stays accurate. During your review if there’s anything that’s false, submit a dispute and be sure to have any supporting documentation that can serve as evidence to support your claim.

Even though we don’t like to admit it, life can present a lot of challenges that we may not be fully prepared for in our ever-changing adulthood journey. This pandemic has shined a light on the areas in our lives that can use some more time, intention and attention. Instead of beating ourselves up about the lack of preparedness, let’s be sure to make adjustments now so no matter what happens with the economy or the state of this country it does not have such a huge, negative impact to our financial goals. Let’s face it – even in the midst of tragedy, this year equipped us with a different level of endurance and resilience. It reminded us what really matters and where our energy should really be dedicated to. Start where you are and do what you can. Refrain from comparing your personal money story to someone else’s. We all have unique situations and obligations that influence our saving and spending plans. Dust yourself off, grant yourself grace and begin a new chapter in your financial journey.

 

The post How to Financially Prepare for Post-Pandemic Life appeared first on MintLife Blog.

Source: mint.intuit.com

What Is a Jumbo Loan? Finance Your Property in a Competitive Market

After years of building a stellar credit history, you may have decided you’re finally ready to invest in that vacation home, but you don’t have quite enough in the bank for that eye-catching property just yet. Maybe you want to begin your investment journey early so you don’t have to spend years bulking up your life’s savings.

If an aspiring luxury homeowner can’t sufficiently invest in a property with a standard mortgage loan, there’s an alternative form of financing: a jumbo mortgage. This mortgage allows those with a strong financial history who may not necessarily be a billionaire to get in on the luxury property market. But what is a jumbo mortgage (commonly known as a jumbo loan), and how exactly does it work?

Jumbo Loan Definition

A jumbo loan is a mortgage loan whose value is greater than the maximum amount of a traditional conforming loan. This threshold is determined by government-sponsored enterprises (GSE), such as Fannie Mae (FHMA) and Freddie Mac (FHLMC). Jumbo loans are for high-valued properties, like mansions, luxury housing, and homes in high-income areas. Since jumbo loan limits fall above GSE standards, they aren’t guaranteed or secured by the government. As a result, jumbo loans are riskier for borrowers than conforming mortgage loans.

Jumbo loans are meant for those who may earn a high salary but aren’t necessarily “wealthy” yet. Lenders typically appreciate this specific group because they tend to have solid wealth management histories and make better use of financial services, ensuring less of a risk for the private investor.

Due to the uncertain nature of a jumbo loan, borrowers need to present an extensive, secure credit history, as well as undergo a more meticulous vetting process if they’re considering taking out a jumbo loan. Also, while jumbo loans can come in handy for those without millions in savings, potential borrowers must still present adequate income documentation and an up-front payment from their cash assets.

Like conforming loans, jumbo loans are available at fixed or adjustable rates. Interest rates on jumbo loans are traditionally much higher than those on conforming mortgage loans. This has slowly started shifting over the last few years, with some jumbo loan rates even leveling out with or falling below conforming loan rates. For example, Bank of America’s 2021 estimates for a 5/1 adjustable-rate jumbo loan were equivalent to the same rate for a 5/1 adjustable conforming loan.

The Federal Housing Finance Agency (FHFA) has set the new baseline limit for a conforming loan to $548,250 for 2021, which is an increase of nearly $40,000 since 2020. This new conforming loan limit provides the new minimum jumbo loan limits for 2021 for the majority of the United States. As the FHFA adjusts its estimates for median home values in the U.S., these limits adjust proportionally and apply to most counties in the U.S.

Certain U.S. counties and territories maintain jumbo loan limits that are even higher than the FHFA baseline, due to median home values that are higher than the baseline conforming loan limits. In states like Alaska and Hawaii, territories like Guam and the U.S. Virgin Islands, and counties in select states, the minimum jumbo loan limit is $822,375, which is 150 percent of the rest of the country’s loan limit.

Jumbo Loan Rates for 2021

Ultimately, your jumbo loan limits and rates will depend on home values and how competitive the housing market is in the area where you’re looking to invest.

Jumbo Loan vs. Conforming Loan: Pros and Cons

The biggest question you might be asking yourself is “do the risks of a jumbo loan outweigh the benefits?” While jumbo loans can be a useful home financing resource, sometimes it makes more sense to aim for a property that a conforming loan would cover instead. Here are some pros and cons of jumbo loans that might make your decision easier.
Pros:

  • Solid investment strategy: Jumbo loans allow the investor to get a solid jump-start in the luxury real estate market, which can serve as a beneficial long-term asset.
  • Escape GSE restrictions: Jumbo loan limits are set to exceed those decided by Freddie Mac and Fannie Mae, so borrowers have more flexibility regarding constraints they would deal with under a conforming loan.
  • Variety in rates (fixed, adjustable, etc.): Though jumbo loan rates differ from conforming loan rates in many ways, they still offer similar options for what kinds of rates you want. Both offer 30-year fixed, 15-year fixed, 5/1 adjustable, and numerous other options for rates.

Cons:

  • Usually higher interest rates: Though jumbo loans are known for their higher interest rates, the discrepancies between those and conforming loan rates are starting to lessen each year.
  • More meticulous approval process: To secure a jumbo loan, you must have a near air-tight financial history, including a good credit score and debt-to-income ratio.
  • Higher initial deposit: Even though jumbo loans exist for those who are not able to finance a luxury property from savings alone, they still require a higher cash advance than a conforming loan.

Jumbo Loan vs. Conforming Loan- Pros and Cons

How To Qualify for a Jumbo Loan

As we mentioned before, jumbo loans require quite a bit more from you in the application process than a conforming loan would.

First and foremost, most jumbo lenders require a FICO credit score of somewhere around 700 or higher, depending on the lender. This ensures your lender that your financial track record is stable and trustworthy and that you don’t have any history of late or missed payments.

In addition to the amount of cash you have sitting in the bank, jumbo lenders will also look for ample documentation of your income source(s). This could include tax returns, pay stubs, bank statements, and any documentation of secondary income. By requiring extensive documentation, lenders can determine your ability to make a sufficient down payment on your mortgage, as well as the likelihood that you will be able to make your payments on time. Usually lenders require enough cash assets to make around a 20 percent down payment.

Finally, and perhaps most importantly, lenders will also require that you have maintained a low level of debt compared to your gross monthly income. A low debt-to-income ratio, combined with a high credit score and sufficient assets, will have you on your way to securing that jumbo loan in no time.

Furthermore, you will also likely need to get an appraisal to verify the value of the desired property, in order to ensure that the property is valued highly enough that you will actually qualify for a jumbo loan.

Key Takeaways:

  • Jumbo loans provide a solid alternative to those with a steady financial history who want to invest in luxury properties but don’t have enough in the bank yet.
  • A jumbo loan qualifies as any amount exceeding the FHFA’s baseline conforming loan limit: $548,250 in 2021.
  • Jumbo loan rates are typically higher than those of conforming loans, although the gap between the two has begun to close within the last decade.
  • To secure a jumbo loan, one must meet stringent financial criteria, including a high credit score, a low DTI, and the ability to make a sizable down payment.

For any financially responsible individual, it’s important to always maintain that responsibility in any investment. Each decision made should be carefully thought out, and you should keep in mind any future implications.

While jumbo loans can be a valuable stepping stone to success in competitive real estate, always make sure your income and budget are in a secure position before deciding to invest. You always want to stay realistic, and if you aren’t interested in spending a few more years saving or financing through a conforming loan, then a jumbo loan may be for you!

Sources: Investopedia | Bank of America | Federal Housing Finance Agency

The post What Is a Jumbo Loan? Finance Your Property in a Competitive Market appeared first on MintLife Blog.

Source: mint.intuit.com

3 Reasons to Set Up a Donor-Advised Fund to Maximize Your Charitable Tax Deductions

Using donor-advised funds is a more advanced tax strategy that has gotten more popular recently with the introduction of the Tax Cuts and Jobs Act (TCJA) in February 2020. The TCJA nearly doubled the amount of the standard deduction, which makes it less advantageous to itemize deductions such as charitable contributions. For people with a lot of charitable contributions, donor-advised funds are one option to still get a deduction for charitable contributions.

What is a donor-advised fund?

A donor-advised fund (DAF) is a registered 501(c)(3) charitable organization that accepts contributions and generally funds other charitable organizations. While the concept of a donor-advised fund has been around for nearly 100 years, they were typically only used by the ultra-wealthy. And while it is true that donor-advised funds are still not going to be useful for the vast majority of people, recent tax law changes have made their use more prevalent.

You can set up a donor-advised fund with most brokerages, including Fidelity, Vanguard, and Bank of America. You can donate cash, securities, or other types of assets to the DAF. The exact list of assets eligible for donation depends on the brokerage. After you have contributed, you can then make charitable contributions from the balance of your account.

You can maximize your charitable tax deductions in one year

One common reason that people set up donor-advised funds is to maximize their charitable tax deductions in a particular tax year. To show why this can be beneficial, I’ll use an example:

Our example family files their taxes married filing jointly and has regular charitable contributions of $20,000 per year. The standard deduction in 2020 for married filing jointly is $24,800. Because their amount of charitable deductions is less than the standard deduction, they may not see any tax benefit from their charitable contributions (depending on their amount of other itemized deductions). In 2021 they again plan to contribute $20,000 to charitable organizations and again are unlikely to see any tax benefit from doing so.

Now consider this same family now decides to set up a donor-advised fund in 2020. They have extra money sitting around in low-interest savings or checking account or in a taxable investment account. So they set up a donor-advised fund in 2020 and fund it with $40,000 in cash, stocks, or other assets. They are eligible to take the full $40,000 as an itemized deduction, even if they only use $20,000 to donate to the charity of their choice. Then in 2021, they can donate the remaining $20,000 to their preferred charity. They will not be able to deduct any charitable contributions in 2021 but can instead take the raised standard deduction amount.

You may be able to deduct the full value of stocks or other investments

Another reason you might want to set up a donor-advised fund is that you may be able to deduct the full value of stocks or other investments. Again, I’ll use an example to help illustrate the point.

Let’s say that you have shares that you purchased for $20,000 that are now worth $50,000. Many charities, especially smaller organizations, are not set up to accept donations of stocks or other investments. So if you want to donate that $50,000 to charity, you may have to liquidate your shares. This will mean that you will have to pay tax on the proceeds.

With a donor-advised fund, you can donate the shares to your fund and deduct the full fair market value of your shares. Then the fund can make the contribution to the charity of your choice.

Donate a wide range of assets

Another benefit to setting up a donor-advised fund is the ability to donate a wide range of different classes of assets. As we mentioned earlier, many charities are not set up in such a way to be able to accept non-cash donations. While the exact list of assets that a donor-advised fund can accept varies by the firm running the fund, it generally will include more types of assets than a typical charity.

Why you might not want to set up a donor-advised fund

While there are plenty of advantages to setting up a donor-advised fund, there are a few things that you might want to watch out for.

  • It’s definitely more complicated than just making charitable contributions on your own. You may find that the tax savings are not worth the extra hassle.
  • On top of the added layer of complexity, most firms with DAFs charge administrative fees that can cut into your rate of return.
  • You may be limited on the charities that you can donate to. Each donor-advised fund typically will have a list of eligible charities. So you may find that a charity that you want to donate to is not available.
  • You also lose control over the funds that you donate – the donation to the fund is irrevocable, meaning once you’ve donated to the fund you cannot get the donation back. While most advisors state that they will donate the money as you direct, they are not legally required to do so.
  • The money in a DAF is invested, so it may lose value. That means that the amount you were hoping to donate may be less than you were anticipating. You also typically have a limited range of investments available for your investment, and those funds also often come with fees.

It’s also important to keep in mind, the annual income tax deduction limits for gifts to donor-advised funds, are 60% of Adjusted Gross Income for contributions of cash, 30% of AGI for contributions of property that would qualify for capital gains tax treatment; 50% of AGI for blended contributions of cash and non-cash assets.

The post 3 Reasons to Set Up a Donor-Advised Fund to Maximize Your Charitable Tax Deductions appeared first on MintLife Blog.

Source: mint.intuit.com

The ABCs of Financial Empowerment

A quick Google search of ‘financial literacy’ will yield thousands of results, listing an infinite amount of do’s and don’ts that should (and shouldn’t) be followed to guide you along on your financial journey.

However, when you think of financial empowerment – what comes to mind? As defined by Merriam-Webster, empowerment is “the act or action of empowering someone or something: the granting of the power, right, or authority to perform various acts or duties.” No matter what your current sentiments are related to your finances, we will explore three key areas to not only embrace; but to help you prepare for a strong financial future.

Awareness

Now more than ever, we all have a laser-sharp focus on our money and where it’s being spent. The pandemic has generated a hypersensitivity to how we treat our finances while also determining what essential expenses look like and where they fit into our budget.

Before life as we knew it to be shifted, many of us don’t have to look too far back to remember a time where we didn’t check our accounts as often, our savings plan would fluctuate month-over-month or our emergency fund was used to bail us out of some impulsive spending.

To make sure those days are forever of the past, make it a habit to take inventory and audit all of your accounts. Take at least 15 – 30 minutes to review over any transactions and deposits across all active accounts. Not only does this help improve your self-accountability, but you are also able to make any disputes if anything appears incorrect and resolve quickly.

Another small but impactful tip is to acknowledge your financial health. What top three areas will be your main point of focus? If this is something you don’t know offhand, review your transactions from the last three months and categorize them. How much of your money went to impulsive buys or things that could have been purchased at a later date? Are you seeing an influx in overhead expenses or credit card payments? Are there any spending patterns you can explicitly see? Allow this exercise to serve as an eye-opening experience.

In order to determine where you want to be, you must first truthfully acknowledge where you are. This sets the blueprint and overall expectations with your personal finance journey. Knowing where you are may not feel pleasant but avoidance will lead to bigger consequences.

Betterment

Even though we don’t like to admit it, there’s always room for improvement and our finances are no exception. The first thing that guarantees mastery is actually following the budget that’s created. This serves as a guardrail – it’s used to keep us on track so we can greet our financial destination with open and inviting arms.

Once that’s in motion, explore ways to enhance your financial experience. Begin by automating recurring expenses, such as cellphone service or utility bills. That’s why it’s so important to be as honest and accurate as possible when setting a budget. Nothing should come to you as a surprise outside of any emergencies. When you trust yourself and the financial work you’ve put in, your finances have no choice but to follow suit.

If you haven’t already (or need to get back on track), work to beef up your emergency fund and savings account. Emergency expenses have a tendency to appear out of nowhere, so you want to dedicate a set dollar amount or a percentage every pay period. Setting up an automatic transfer to these accounts establish a routine while putting your mind at ease in the process.

Is there a hobby or skill you’d like to put to use and monetize? No matter how grandiose or small, this can definitely expedite achieving your financial goals. The money earned from a passion project can go toward savings, paying off debt or simply getting back to a place of comfort financially. Vacation funds or prepping for large purchases such as a car or home can also fall within this category. If you want to seek the assistance of a professional, search for financial advisors or coaches that could help you with reaching your goals. Preparation is key and your future depends on it!

Confidence

The foundation has been laid and you’ve been committed to crushing your financial goals. The budget and savings goals are in motion; so what’s next? It’s time to celebrate! Walk into your financial future with your best foot forward. When times seem bleak, remind yourself of your goals early and often.

Reinforcement such as daily reminders on your phone, having goals posted somewhere in your home you can see daily or reciting positive financial affirmations will serve as a second wind when you want to throw in the towel. Be sure to celebrate wins along the way such as debt payoff, reduction or hitting a new savings goal. Never been able to invest before and now you have the additional income to get in the game? Celebrate that!

The best way to generate excitement is to rally your family and get them involved. Create family challenges to get your children excited about saving funds and reallocating money. Come up with creative ways you all can commemorate knocking out a goal by ordering from your favorite restaurant or saving for a family staycation.

In order to walk in confidence, you have to build up the courage to begin no matter where you are or how many times you’ve had to start over. Each step counts – each successful budget, savings goal and consistent reduction of overall expenses. Be sure to keep in mind, financial freedom looks different for everyone and has the ability to pivot over time. While some may want to vacation throughout the year, save for their children’s college fund or wipe debt out completely, all are significant and take sacrifice. What is the key to achieving such a pinnacle level of confidence? Time.

 

Be kind to yourself and understand mistakes should never be equated to failures. Your commitment to this financial journey will always be rewarded.

The post The ABCs of Financial Empowerment appeared first on MintLife Blog.

Source: mint.intuit.com

Steps to Getting A Financial Advisor in your 20s

Getting a financial advisor in your 20s is a responsible thing to do. At the every least, it means that you are serious about your finances. Finding one in your local area is not hard, especially with SmartAsset free matching tool, which can match you up to 3 financial advisors in under 5 minutes. However, you must also remember that a quality financial advisor does not come free. So, before deciding whether getting a financial advisor in your 20s makes financial sense, you first have to decide the cost to see a financial advisor.

What can a financial advisor do for you?

A financial advisor can help you set financial goals, such as saving for a house, getting married, buying a car, or retirement. They can help you avoid making costly mistakes, protect your assets, grow your savings, make more money, and help you feel more in control of your finances. So to help you get started, here are some of the steps you need to take before hiring one.

Need help with your money? Find a financial advisor near you with SmartAsset’s free matching tool.

1. Financial advice cost

What is the cost to see a financial advisor? For a lot of us, when we hear “financial advisors,” we automatically think that they only work with wealthy people or people with substantial assets. But financial advisors work with people with different financial positions. Granted they are not cheap, but a fee-only advisor will only charge you by the hour at a reasonable price – as little as $75 an hour.

Indeed, a normal rate for a fee-only advisor can be anywhere from $75 an hour $150 per hour. So, if you’re seriously thinking about getting a financial advisor in your 20s, a fee-only advisor is strongly recommended.

Good financial advisors can help you with your finance and maximize your savings. Take some time to shop around and choose a financial advisor that meets your specific needs.

2. Where to get financial advice?

Choosing a financial advisor is much like choosing a lawyer or a tax accountant. The most important thing is to shop around. So where to find the best financial advisors?

Finding a financial advisor you can trust, however, can be difficult. Given that there is a lot of information out there, it can be hard to determine which one will work in your best interest. Luckily, SmartAsset’s free matching tool has done the heavy lifting for you. Each of the financial advisor there, you with up to 3 financial advisors in your local area in just under 5 minutes.

3. Check them out

Once you are matched with a financial advisor, the next step is to do your own background on them. Again, SmartAsset’s free matching tool has already done that for you. But it doesn’t hurt to do your own digging. After all, it’s your money that’s on the line. You can check to see if their license are current. Check where they have worked, their qualifications, and training. Do they belong in any professional organizations? Have they published any articles recently?

Related: 5 Mistakes People Make When Hiring a Financial Advisor

4. Questions to ask your financial advisor

After you’re matched up with 3 financial advisors through SmartAsset’s free matching tool, the next step is to contact all three of them to interview them:

  • Experience: getting a financial advisor in your 20s means that you’re serious about your finances. So, you have to make sure you’re dealing with an experienced advisor — someone with experience on the kind of advice you’re seeking. For example, if you’re looking for advice on buying a house, they need to have experience on advising others on how to buy a house. So some good questions to ask are: Do you have the right experience to help me with my specific needs? Do you regularly advise people with the same situations? If not, you will need to find someone else.

5 Reasons You Need to Hire A Financial Consultant

  • Fees – as mentioned earlier, if you don’t have a lot of money and just started out, it’s best to work with a fee-only advisor. However, not all fee-only advisors are created equal; some charges more than others hourly. So a good question to ask is: how much will you charge me hourly?
  • Qualifications – asking whether they are qualified to advise is just important when considering getting a financial advisor in your 20s. So ask find about their educational background. Find out where they went to school, and what was their major. Are they also certified? Did they complete additional education? if so, in what field? Do they belong to any professional association? How often do they attend seminars, conferences in their field.
  • Their availability – Are they available when you need to consult with them? Do they respond to emails and phone calls in a timely manner? Do they explain financial topics to you in an easy-to-understand language?

If you’re satisfied with the answers to all of your questions, then you will feel more confident working with a financial advisor.

In sum, the key to getting a financial advisor in your 20s is to do your research so you don’t end up paying money for the wrong advice. You can find financial advisors in your area through SmartAsset’s Free matching tool.

  • Find a financial advisor – Use SmartAsset’s free matching tool to find a financial advisor in your area in less than 5 minutes. With free tool, you will get matched up to 3 financial advisors. All you have to do is to answer a few questions. Get started now.
  • You can also ask your friends and family for recommendations.
  • Follow our tips to find the best financial advisor for your needs.

Articles related to “getting a financial advisor in your 20s:”

  • How to Choose A Financial Advisor
  • 5 Signs You Need A Financial Advisor
  • 5 Mistakes People Make When Hiring A Financial Advisor

Thinking of getting financial advice in your 20s? Talk to the Right Financial Advisor.

You can talk to a financial advisor who can review your finances and help you reach your saving goals and get your debt under control. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post Steps to Getting A Financial Advisor in your 20s appeared first on GrowthRapidly.

Source: growthrapidly.com

Money Moves to Make in Your 20s, 30s, and 40s

Reaching your twenties is an exciting milestone for most as it means you’ve officially entered adulthood. Along with that milestone comes new responsibilities and worries that we didn’t picture when our teenage selves dreamed of turning 21. We imagined our college graduation, moving into our first apartment, and launching our new career. That vision didn’t include dealing with student loan debt, taking on a low paying entry-level job, or having to confront that despite spending 4 years in college, you’re still unsure how the world of personal finance actually works.

It’s easy to dismiss it all because well you’re a 20 something, and you’ll have plenty of time to play catch up. The reality is that each decade plays an important role in our future financial health. Take the time now to learn about your money and follow the money moves outlined below to put yourself on a path of lifelong financial success and eventual freedom.

Money Moves to Make in Your 20’s:

Learn How To Budget

Building a budget doesn’t have to be overly complicated or time-consuming. It’s actually the first step in putting yourself in control of your finances because it means you know where your money goes each month. The good news is that there are lots of apps and online tools that can make the process a breeze. Consider a system like Mint that will connect to your accounts and automatically categorize your spending for you. The right budgeting tool is simply the one you’ll stick with long term.

Pay Off Debt

Debt isn’t all bad. It may be the reason you were able to earn your degree, and a mortgage may help you one day buy a home. It can also quickly overrun your life if you aren’t careful. Now’s the perfect time before life gets more hectic with family commitments to buckle down and tackle any loans or credit card balances so you can be debt-free going into your 30’s.

Build a Cash Cushion

The financial downturn caused by the pandemic has reminded the whole world of the importance of having an emergency fund. We don’t know what life is going to throw at us and having a cushion can help you navigate the uncertain times. Though it’s not all about having a secret stash of cash to deal with the bad news of life (medical bills, car repair, layoff), it can also be about having the cash to seize an exciting opportunity. Having savings gives you the freedom and security to deal with whatever life brings your way – good or bad.

Understand Credit

Your credit score can dictate so much of your life. That little number can play a big role in the home you buy, the car you drive, and even the job you hold as some employers (especially in the finance world) will pull your credit. It’s important that you check your credit report and score (also available through Mint), learn how it’s calculated, and work to improve it.

Money Moves to Make in Your 30’s:

Invest For Retirement

Now that you’ve spent your 20’s building the foundation for your financial life, it’s time to make sure you’re also tackling the big picture goals like saving and investing for retirement. I typically recommend that clients save 10% to 15% of their annual income towards retirement. That may seem like an insurmountable goal, but starting small by saving even 1 to 3% of your salary can make a big difference in the future. Also, make sure to take advantage of any matching contributions that your employer may provide in your retirement plan. If, for example, they offer to match contributions up to 6%, I would try hard to work towards contributing at least 6%.

Buying Your First Home

Buying your first home is a top goal for many, but it also seems to be getting increasingly more difficult especially if you live in a major city. The most important steps you can take is to improve your credit score, pay down high-interest debt, and be aggressive about saving for a down payment. Saving 20% down will help you qualify for the best loan terms and interest rate, but there are still home loans available even if you aren’t able to save that much. Just be realistic with your budget and what you can afford. Don’t let a lender or real estate agent determine what payment will fit into your budget.

Be Covered Under These Must-Have Insurances

You’ve spent the last several years building your savings and growing your family. It’s now crucial that you have the proper insurance coverage in place to protect your assets and your loved ones. Life and disability insurance are top of the list. Life insurance doesn’t have to be expensive or complex. Get a quote for term-life that will last a set number of years and protect your partner and children during those crucial years that they depend on you. Disability insurance protects your income if you become sick or injured and are unable to work. Your earning ability is one of your biggest assets during this time, and you should protect it. This coverage may be offered through your employer, or you can request a quote for an individual policy.

Invest in Self-Care and Well Being

Mental health is part of self-care and wealth. Most people don’t talk about how financial stress and worry affect their overall health. When you can take care of yourself on all levels, you will feel healthier and wealthier, and happier. But it is not easy. It takes work, effort, awareness, and consciousness to learn how to detach the value in your bank account or financial account from your self-worth and value as a human being. When you feel emotional about your money, investments, or the stock market, learn ways to process them and take care of yourself by hiring licensed professionals and experts to help you.

Money Moves to Make in Your 40’s:

Revisit Your College Savings Goal

As your kids get older and prepare to enter their own journey into adulthood, paying for college is likely a major goal on your list. Consider opening a 529 plan (if you haven’t already) to save for their education. 529 plans offer tax advantages when it comes to saving for college. There are lots of online resources that can help you understand and pick the right plan for you. Visit https://www.savingforcollege.com. This is also a great time to make sure you’re talking to your kids about money. Give them the benefit of a financial education that you may not have had.

Get Aggressive with Retirement Planning

Your 40’s likely mark peak earning years. You’ll want to take advantage of your higher earnings to maximize your retirement savings especially if you weren’t able to save as much in your 20’s and 30’s. Revisit your retirement plan to crunch the numbers so you’ll be clear on what you need to save to reach your goal.

Build More Wealth

You’ve arrived at mid-life probably feeling younger than you are and wondering how the heck that big 4-0 got on your birthday cake. We typically associate being 20 with being free, but I think we’ve got it wrong. There is something incredibly freeing about the wisdom and self-assurance that comes with getting older. You’ve proved yourself. People see you as an adult. Your kids are getting older and your finances are more settled. Now’s the time to kick it up to the next level. Look for ways to build additional wealth. This may mean tapping into your entrepreneurial side to launch the business you’ve dreamed of or buying real estate to increase passive income. Now’s also a great time to find a trusted financial advisor who can help guide your next steps and help you plan the best ways to build your wealth.

Revisit Your Insurance Coverage

Insurance was crucial before, but it’s time to revisit your coverage and make sure you’re protected especially if you decide to launch a business or buy additional real estate. This is also where a financial advisor can help you analyze your coverage needs and find the policies that will work for you.

Consider Estate Planning

Estate planning (think wills, trusts, power of attorney) isn’t the most fun / exciting topic. It involves imagining your gone and creating a plan for the loved ones you leave behind. It is also often overlooked by adults in their younger years. It’s easy to assume estate planning is something the wealthy need to do. It really comes down to whether you want to decide how your life savings will be managed or if you want a court to decide. It’s also crucial for parents with children who are minors to select a guardian and have those uncomfortable conversations with their family members about who would care for the children if the worst were to happen. It’s also a good time to visit this topic with your own aging parents and make sure they have the proper documents and plans in place.

 

Whether you’re in your 20’s, 30’s or 40’s, it can be easy to put off planning your finances especially in the middle of a pandemic. Most of us are busy, and it’s easy to tell yourself that you’ll have time to work on a goal in the future. Commit to setting aside one hour each week or even each month to have a money date and review your finances. Don’t let yourself reach a milestone birthday (30, 40) and regret not being farther ahead. Follow these money moves now to seize control of your financial future.

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Source: mint.intuit.com