Regardless of your current status; Single, in a serious relationship, married, changing careers, starting or expanding your family, getting divorced or caring for elderly parents, there are some key financial steps you should be taking to ensure you meet your financial goals.
Key financial steps to take if you are employed
- If your employer offers a retirement savings plan that has a match, you should definitely be taking advantage of it. You can do this by contributing enough to at least get the full match your employer is offering. It's essentially free money.
- Set up your emergency fund. Your first goal should be getting it to $1,000 and then subsequently to 3 - 6 months of your basic living expenses. This would be to cover things like food, transportation, and housing. This way you can ensure you don't have to leverage debt in the event of an unexpected situation. Getting laid off, getting your car fixed or getting home repairs or replacements can all be major expenses.
- Start paying off any debt you might have especially high-interest credit card debt. If you have high-interest debt, get your emergency fund to $1,000 and then focus on getting rid of that debt asap. High-interest debt is very expensive and the longer you keep it, the more you pay.
- Review your insurance options to make sure you have the right ones in place (disability, life, health, auto, home, rental, etc). Also, keep your beneficiaries up-to-date on all your accounts.
- If you have children, you can start saving for their college education needs and start building their shorter-term needs into your budgeting and savings plans as well.
- A few things to note about retirement savings:
- If your employer's plan does not have a match, contribute anyway with a goal to eventually max out your contributions.
- No employer-sponsored retirement plan or self-employed? Set up your own IRA through a brokerage and make your retirement contributions that way. The limits are lower but it's a great start to your long term retirement savings. In addition, you can start looking into non-retirement investing and repurpose them as investments towards your retirement.
Key financial steps to take if you are in a serious relationship or marriage
- It's important that you are communicating your life and financial goals with your partner. Talk about what you'd like to accomplish together. Set time aside once a month to go over your progress and to review your budget as a unit including your debt repayment, savings, and investment plans.
- If you are married, be sure to update your beneficiary information on your accounts and insurance to include your significant others i.e. your spouse and children.
- File your taxes together to avoid the penalties of filing separately if you are married. If you file separately you will have a higher tax rate and will be unable to claim certain tax exemptions and deductions. If your preference is to file your taxes separately while you are married, be sure to discuss things with a tax accountant so you are aware of the differences in both scenarios.
Key financial steps to take when switching jobs
- If you've found a new job don't forget to move your retirement savings plan away from your old employer. This is because many employers charge maintenance fees for retirement accounts that belong to former employees. As opposed to rolling your retirement savings into your new employer's plan, consider rolling it into your own IRA through a brokerage firm as you will have more investment options.
- Start investing in your new employer's retirement savings plan if they offer one. You don't want to take any unnecessary breaks away from your long term savings plans.
- Review your insurance needs and options and adjust accordingly i.e. disability, life, health, auto, home, rental, etc
Key financial steps to take when you are expecting a baby
- While having children are a blessing, they also come with their own expenses. You want to be sure that you include your child's expenses in your monthly budget.
- Consider what your costs of having a new baby will be initially e.g. formula, diapers, clothes, childcare, etc and plan accordingly by saving for baby's needs in advance of their arrival.
- Update your health and life insurance to include your child so they are adequately covered.
- You also want to bulk up your emergency fund to include your child's basic needs for 3 to 6 months as well.
- In addition, start putting money aside for your child's future expenses and college education.
Key financial steps to take after a divorce or loss of a spouse
Unfortunately, divorces happen but it's important to get back on your feet as quickly as possible when it comes to your finances.
- Be sure to close all joint accounts and open new accounts in your own name.
- Update your beneficiaries on all your accounts including your insurance and retirement savings accounts.
- Learn how to budget on your own and review your finances on a monthly basis at the very minimum.
- Focus on rebuilding and take ownership of your finances in its entirety - budgeting, bulking up your emergency fund, tax planning, retirement savings etc
- Be aware of and review your social security benefits.
- Understand the tax implications of inheriting any investment or retirement accounts due to the loss of a spouse.
Key financial steps to take when caring for elderly parents
- Determine what cost of caring for your aging parents is and include it in your financial picture so you are prepared for the expenses you have to pay.
- Determine what financial and health care options they have in place for themselves including any social security benefits and then determine what gaps needed to be filled.
- Update your dependents on your insurance documentation and when you file your taxes.