Thinking about your financial future may seem overwhelming, but planning ahead is really important for achieving certain life goals.
Although each individual will have a slightly different view on what they want to accomplish in life, there are some common milestones that many of us share. We've outlined five of the financial big ones, along with some useful tips on how to prepare for each one.
1. Buying your first home
Many of us dream of getting the keys to our first home, but the deposit required by mortgage lenders can often make it seem out of reach.
First time homebuyers with a good credit score can now take advantage of smaller deposits, which means you only need a cash deposit of 5% of the property's value. It's important to remember that while your deposit is lower, you'll need to start saving for closing costs too. Learn what’s available in your state with this handy guide from Nerdwallet.
2. Merging your finances with a significant other
If you're getting married or you’re in a long-term domestic partnership, you'll likely need to think about how to manage your money together. It's a good idea to try to understand each other's attitude toward money and figure out a fair way of paying bills.
You may want to keep separate bank accounts, share everything as a couple, or have a middle ground where you share some responsibilities, and keep others private.
Discussing your finances regularly will help you deal with any issues that come up and hopefully avoid major arguments.
3. Starting a family
Starting a family can be very exciting if that’s something that’s important to you, but it is a huge financial commitment. A good first step is to find out what parental leave and medical benefits you're entitled to through your employer. Then think about how much time you want to take off work and if you will be without pay for any period of time. Parental leave is an area of constant evolution, especially in the US. Learn more about the Family and Medical Leave Act (FMLA), which provides certain employees with up to 12 weeks of unpaid, job-protected leave per year. And of course, it doesn’t stop once the baby gets here. According to a 2017 report from the U.S. Department of Agriculture, the average cost of raising a child from birth through age 17 is $233,610. Being financially prepared for children is important.
Unfortunately life doesn't always go smoothly. It's important to be prepared for events like unemployment or unexpected bills. This could include saving up an emergency cash fund and/or making sure your insurance coverage has you covered in case something were to go wrong.
Try and work a small contribution to your savings buffer into your everyday budget.
Retirement may seem like a lifetime away, but planning early is crucial. Life expectancy is rising, which means your money may need to last for around 30 years after you stop working.
Although some of these milestones may seem daunting and a long way off, there are financial solutions and steps you can take to make things more manageable.