Financial Planning for Every Stage of Life: Starting Your Career

Like snowflakes and fingerprints, each individual’s financial plan is utterly unique. Yet unlike fingerprints, one’s financial plan must be pliable. As you grow older, your life will change — due to career, marriage, or a variety of other factors — and as your life changes, so must your financial plan. With this in mind, it’s important to set financial goals and priorities for each stage of your life and to allow for your plan to change as your needs to change.

This article will focus on financial priorities for post-grads starting their careers. Other posts in this series will consider financial priorities after marriage, after child birth, and during a variety of other stages in one’s life.

Stage 1: Starting Your Career

At best, many starting their career only consider finances in the short-term. How much can I afford in groceries this week? Can I buy a new outfit for work? At worst, those in their early 20s have no sense of their financial situation and end up with huge amounts of debt.

However, if you prioritize these financial action steps, you will be able to build a strong foundation for your financial future.

1. Track your spending

You start by building a feasible budget, one that is responsible but also allows room for mistakes or emergencies. Then ensure you are following this budget. Apps such as Mint or EMoney make tracking expenses more mobile and simple and will in turn allow you to make more informed spending decisions.

2. Prioritize high-interest debt

This means paying off credit card debt, which will accrue interest more quickly, before moving on to student loans. Of course, paying more than the minimum on your student loans is critical. In general, prioritizing loan payment over other, more frivolous, expenses is a must for building a solid financial foundation.

3. Begin planning for retirement

Take some time to review your employer’s retirement plan and see if their is a matching option. If there is, make sure you are contributing enough to trigger the matching option. This free money from your employer will pay off big in the long run.

4. Start an estate plan

This includes giving someone in your life power of attorney, or the authority to act on your behalf in business and legal hearings if you become unable to do so. In a similar vein, designating a health care proxy will give someone the power to make healthcare decisions for you if you are unable to do so. Finally, construct a living will — essentially an outline of healthcare actions you would like taken if you are incapacitated.

5. Designate beneficiaries 

Naming a beneficiary on a financial account codifies who the assets who be allocated to in the event of your death. While you will likely have to change beneficiaries as your life changes, it’s smart to start by naming parents or siblings.

6. Make sure you have the appropriate insurance

While many in their 20s now have health or car insurance, you may forget about disability insurance or assume it’s unnecessary at this point in your life. However, this leaves you unprotected in the event of illness or injury. Having disability insurance will ensure you are provided for no matter what life throws your way.

Source: Forbes.com