Financial Wellness at Different Stages in Your Career
What do you want to be when you grow up? What is your dream vacation? If you could have any job, what would it be?
The answers to these questions change as you get older, enter a new stage in life, move to a new country, etc. Similarly, the notion of what financial wellness means shifts as your career situation changes. This is normal.
While different financial wellness benchmarks exist, it’s important to keep yourself grounded and focus on what is right for you and your financial needs as you approach or peak each of life’s major milestones.
Embarking Upon Your Career. This is a huge milestone for many as it is their first introduction to the “real life workforce.” Here you will want to make sure you start fresh by creating a budget (know how much income you actually have on a regular basis, what bills need to be paid when, and the difference between dollars to be saved and discretionary funds), initiate your first 401(k) through your employer, and identify and plan to pay down any debt (student loans, credit cards, car payment, etc.). This stage can be one of the most difficult as the amount of income will be higher than in previous years, your assets will increase, and your financial priorities may be unintentionally skewed. Creating a rational budget will help keep you on track. Your goal in this stage should be to establish good credit, start a good habit of living within your means, and pay off any outstanding debt as quickly as possible.
Switching Jobs/Getting Promoted. As you take on new professional opportunities and responsibilities, you will likely start making the transition from paying off debt to saving more funds with purpose. Your personal focus may be on starting or building your family and buying your dream house. Your financial goals should include saving for your child’s education, growing your savings, purchasing or getting better health insurance, and investing in life insurance. In this stage, it is important to protect your investments, prepare for additional beneficiaries, and make some realistic assumptions about what you want retirement to look like.
Pre-Retirement. In this stage, you are probably maximizing your income, and should subsequently maximize your retirement plan contributions. You can assume your mortgage and credit cards are paid off, your children are out of college, and you can focus on the next stage: Retirement. It is important to also consider if you will be taking care of your parents by committing a certain percentage of your income or savings to aid in their health care or assisted living expenses. You would also want to ruminate on your own long-term care plans. It wouldn’t hurt at this stage to consult a financial advisor to confirm all your planning and preparing for retirement was done properly and you are prepared to take retirement benefits without taking penalties or being taxed.
Retirement. Just as you did when you entered into a formal career, you’ll want to create a budget, this time understanding your income will be more limited, but your expenses may remain the same. Take some time to review your investments to ensure you are able to withdraw funds, if necessary, without any penalties. Meeting regularly with a financial advisor will help you stay aware of which accounts you can pull from first without any tax liabilities.
At any stage in life, it is important to set financial goals, both short and long-term. Adjust goals regularly to ensure you are meeting your needs and prepare for a secure retirement. However, unexpected expenses are difficult to plan. Take advantage of EmployeeMoney’s relationship with your employer. Eligibility is always based on your current employment rather than your credit score. It’s the alternative to other high-cost lender options that can actually keep you on the right track.