Know Your Expenditure In Different Stages Of Life
BENGALURU: Everyone has his/her own lifestyles and investing through their life stages, which can differ from one person to another. Your income, priorities, and spending habits change depending on your life stage. These changes can be better navigated if your investments change with you, according to indiatimes.com.
Sign Up For the 401(K) at your First Job:
If you are a fresh graduate out of college, the main focus is on the cash inflow from your job. Money may be tight, but you still need to take advantage of any retirement savings programs that are being offered by your employer. That means, if you fund a 401(k), you eventually lower the amount of income you have to pay taxes on, which can soften the blow to your take-home pay.
As for your investment strategy, you need to be in the stock market, regardless of what has happened in the recent past. The rule of thumb is 100 minus your age is what percentage should be in equities.
Newly Married:
Many newly married couples have a dream of homeownership, which can affect how they invest. To fund a home purchase at this stage you and your spouse may want to pull back some of your retirement contributions to buy a house but at the same time keep in mind your end goal of having enough money in retirement.
It's also a time when you both have to be on the same page, on the issue of how much money is being spent and how much is being saved and invested. The dominant financial partner, as well as the non-dominant one, have to understand what they are spending and saving together.
Saving for your Child’s Future:
Everything changes when you have a baby, because now you have to think not only of u and your wife but also your new born and his/her future. While you still want to be aggressive in the stock market, you also are looking at saving for your child's college education. It's also the time when you should be taking out life insurance or making sure you have enough coverage if you already have a policy.
It's very important as you go through the life phases that you update your beneficiaries in your retirement accounts and life insurance policies.
Re-Examination of your Investment:
For most of your working life, you have hopefully been accumulating wealth and as you head into your 50s, you should be planning for your retirement. That doesn't mean you should move all your money into something safe, but it does mean that you want to take a look at how heavy your investing risk has gotten. According to some people, the major biggest risk is losing a major portion of your retirement fund around the time you want to retire.
So always make sure that you're invested in proper investments scheme. This means, you invest in stocks, but you should also be looking at fixed income or bonds they provide.
Reducing Your Investment Risk:
Long gone are the days when you retire and then die a few years later. These days, people are spending 25 to 35 years in the retirement phase, which means the biggest two risks are outlasting your money and protecting it from inflation. While you may think it's smart to move all your money into something safe like bonds, the reality is you need that money to grow at a rate higher than inflation or your retirement money will have less buying power.
If you are investing in higher-growth, small- or mid-cap stocks, it may be the time to move to dividend-paying stocks that are safer but will produce some income for you. It's also the time to start looking at legacy planning if you have heirs.
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