Financial advice through (your) ages, part I – Post Bulletin

This month, Part I: Those Investing Universals. Your Foundation Stage (up to age 20 or so). And Your First Career (your 20s)

(What everyone should be doing, regardless of age.)

Set goals.
“When it comes to financial health and wellness, it’s important to set goals and to continue to pursue them over an entire lifetime. Financial success is not something that happens once and is forever guaranteed; it takes sustained effort and a continued desire to improve. Becoming financially healthy is not an easy journey, but it’s a worthwhile and rewarding one!”
(Jackie Urban, Altra Federal Credit Union)

Strive for that home ownership.
“Owning a home is incredibly valuable in today’s market. The wealth comparison for renters and homeowners is quite substantial. The average wealth of a renter in 2021 is approximately $8,000, whereas the average wealth for a homeowner is about $297,000. With this in mind, I highly recommend pursuing and maintaining real estate ownership or investments. To those who feel that they may have missed one of these milestones or stages, my advice to you is that it is never too late to invest in real estate. If owning a home seems daunting to you, start with a townhouse and ease your way into home ownership. You will be glad you did!!”
(Debra Quimby, RE/MAX Results)

Categorize your finances.
“These are the main categories of financial health:
1. Saving: education, car and home maintenance, retirement, travel/fun, rainy day due to loss of job, etc.
2. Establishing credit.
3. Building wealth: diversification of investments.
4. Estate planning and preservation of assets.
5. Retirement.”
(Heather Donovan, Sterling State Bank)

Give yourself a break. Then get honest with yourself.
“We may look around our neighborhood and see a lot of similarities from our homes to our cars, but the financial story inside every one of those homes is very different. The most important piece of advice I can offer is to give yourself some grace if you’re not where you want to be. Some of us have student loan debt to focus on, or had a difficult life situation that cost our savings, and some may have been gifted financial security from family. I recommend taking an honest look at your finances right now and figuring out what your top priorities are. Is it becoming debt-free? Early retirement? Or do you want to build a new home? Taking a very real look at where your finances are right now and what your goals are for the future is a critical first step.”
(Randy Brock, Wightman-Brock Real Estate Advisors)

The Foundation Years (0-20)

Create a basic spending (and saving) plan.
“Learning Stage: This phase starts in childhood, before a child’s or young adult’s financial journey has even begun. Before earning a paycheck, it’s important to have knowledge on how to create a basic spending plan that can take care of priorities, while also creating some room for saving money. It’s also never too early for a child or young adult to think about what they’d like to do in the future and what education or experience will they need to get there. Know that plan is fluid and can change. The more knowledge an individual has at this initial stage in life, the better and more successful they will be when they start earning money.”
(Jackie Urban, Altra Federal Credit Union)

Get quality credit.
“At age 18, start establishing positive credit immediately. Insider knowledge: I’ve originated auto and home loans. For mortgages, the score is just a qualifier. What’s behind the score doesn’t matter. I had 740+ FICO buyers get turned down for auto loans because they did not have enough ‘quality lines of credit.’ That same buyer would be qualified to buy a home. Getting established on the bureaus is as simple as a few timely credit card payments.”
(Maxwell T. Weisheipl, PrimeSource Funding)

Get into a good relationship … with finances.
“We need to teach our children about a healthy relationship with finances. If you are feeling inadequately prepared, a great first step is to hire a financial planner. This planner would not sell you products, but instead ask you what your goals are for each stage in your life, and structure a plan to help you achieve these goals.
Up until age 18, the focus should be on learning to save, balance funds, learn what things cost, learn about alternatives to save money, and establish good credit.”
(Heather Donovan, Sterling State Bank)

Look at alternative education plans.
“Alternatives in education is a major topic of discussion for 17-22 year olds. Many individuals are not focused on saving money when it comes to education because they were never advised on this topic. If the career choice allows, technical programs and junior colleges will save enough money for individuals to be able to purchase a home and build their wealth much earlier in their lives and this can make a huge impact on their financial future. It could mean earlier retirement, more leisure activities, earlier financial freedom, and the ability to set themselves up for a comfortable financial future.”
(Heather Donovan, Sterling State Bank)

(your 20s, hopefully)

Start early with home and retirement plans.
“At age 19-24, it’s not too soon to look at buying a home. Try to qualify with a 20-year mortgage—rates drop significantly at the 20-year mark and much more of your payment will go towards the principal balance vs. interest. At age 21, start thinking towards retirement. It sounds silly, but the monies that are put away in your 20s have the longest time to grow gains.”
(Maxwell T. Weisheipl, PrimeSource Funding)

Start that long relationship with money management.
“First Income and Setting a Foundation Stage: This is the start of a long relationship of managing money and earning a paycheck. During this stage it’s a good idea to set up a savings account if that hasn’t been done already, and possibly a checking account to help manage, protect, and grow money. Having a plan for income that includes some money set aside for savings is ideal.
Starting an emergency fund may be easiest at this stage because there may not be too many obligations yet. An emergency fund should cover three to six months of living expenses and should be in an account that’s easily accessible because the future can be unpredictable.

It’s also important to have the discipline to stick to a spending plan that does not overdraw a checking account or dip into savings too often. When comfortable managing a checking account, it can be a good idea to open a credit card or take out a loan to start a positive credit history which will be useful in the future for larger purchases. It’s important not to use credit to enhance lifestyle and live beyond the means of the borrower.
Protection of assets and wealth preservation is important during this stage and is done by having insurance for a car or an apartment. Those in this stage are young but will still need medical insurance because accidents and illness can still happen, so it’s best to be protected.

Beginning to allocate money for investments for retirement is an important task at this stage even though the goal may seem too much in the future to be relevant now.

Setting short- (a year or less) and long-term (a year or more) goals for finances are important during this stage, which can help determine priorities that need to be in a spending plan. Those in this stage should research what they’d like to do in the future (education needs, travel, start a business, help others, etc.) and what’s the best way to get there.”
(Jackie Urban, Altra Federal Credit Union)

Hit your 30s with retirement savings in full swing.
“By the time you hit your 30s, you should hope to have 1x of your salary saved in a retirement account. Consider saving towards your Roth IRA/401(k)/403(b) if income is likely lower now than it will be in later decades. Pay off your student loans.
Also, now is the time to create a household budget for two main reasons: Eliminate the possibility of having a credit card balance and give some clarity and comfort around where your dollars go each month.”
(Natalie Slagle, Fyooz Financial Planning)

Establish credit.
Keep financial flexibility.
“From age 18-25, work on getting credit established. Open a credit card or get a car loan (secured credit is better). Make sure payment is affordable and minimal so more monies can be used for your house payment. For example, stretch out the car loan payments to four years instead of two years, or eight years instead of five years. You can always prepay, so you still can pay it off earlier, but gives you more financial flexibility and afford more to purchase a home.”
(Roxanne Hellickson, Hancock Mortgage Partners)

Look at buying a home. Find that predictable income.
“First Time Home Buyers: If you are in this stage of life, consider the stability of your job. Do you have a predictable income? Many of my first time home buyers initially believed they were not ready to purchase a home simply because of their age. You can certainly own real estate in your early 20s and 30s. In our area in Rochester, we have many medical residents, nurses, and associated medical professionals who have both financial security and access to affordable housing. Additionally, there are an abundance of financing options to assist first time home buyers. Upon contrary belief, you can even purchase your first home with as little as 3% of the sale price!”
(Debra Quimby, RE/MAX Results)

Find your balance.
Interview financial advisors.
“22-30 year olds have typically found a career they enjoy and are at the point of paying down debt on education, homes, starting a business. At this point it is important to find a balance of paying down debt and improving their savings, and beginning to save for retirement. I would advise people in this age range to interview two or more financial advisors to find one that is a good fit for them. In these interviews you should discuss your financial goals through each stage of life, and get recommendations from the financial advisors on where the best place to invest your money is, to produce the most wealth over time, and allow you to strategically have multiple sources of income in retirement.
It is also very important to have contingency plans in place if something traumatic happens to you or a family member. Long term and short term disability insurance and a healthy savings should be priorities.

During the period of growing families, it is very important to meet with an attorney to establish a will. This is important because in the instance of your passing, you will want to have preparations made for the person that will care for your children.”
(Heather Donovan, Sterling State Bank)

Learn to live within your means.
“For 20-somethings just starting their financial life, we recommend learning to live within their means, avoiding bad debt (like high interest rate credit cards), and establishing a savings target of at least 15% of their gross income. This savings target should initially be focused on building an emergency cash reserve equal to at least three months of total monthly expenses.

Beyond this emergency cash reserve, we recommend aggressively paying down any student or car loan debt while also contributing to an employer 401(k), 403(b), or 457 plan, up to the maximum needed to get the employer match. With any remaining savings, we recommend fully funding a Roth IRA at $6,000 each year to harness the immense power of tax-free compounding as early as possible.”
(Matt Morehead, Carlson Capital Management)

Follow the 1-1-1 rule.
“Increase retirement savings by at least 1% a year. My 1-1-1 Rule is this: On the first of the year, increase your retirement savings by 1% and do this every year. These are, of course, minimum guidelines—3% to 4% is better. Set up automatic increases each year for your retirement plans so this is on auto pilot. Most of us don’t save well and are not proactive so do all you can so this just happens.”
(Colin Aldis, Emerald Financial Group)

Practice making that house payment.
“For 25-30 year olds: Practice making a house payment before you are contractually committed. If you are renting, and your rent is $600/month, figure out what your house payment would be including real estate taxes and homeowners insurance. Let’s say that ends up being $900/month. Take the extra $300 and put it into savings. This way you are practicing making the payment to make sure it fits into your lifestyle, plus you are saving monies for a downpayment or things you may need for your new home. It’s also nice to have a nest egg when owning a home! Also, take out a 30-year mortgage to give you more financial flexibility as you may have student loans and other expenses that will come up during this time of your life. Make sure your first home is a good investment and can be re-sold to a large market, as most people don’t stay in their first home more than seven years.”
(Roxanne Hellickson, Hancock Mortgage Partners)

Put your plan in writing.
“Create a budget. Now is a great time to start tracking your expenses, and establish a written plan. Build an emergency savings fund, with a goal amount of three to six months of living expenses (or more). Prioritize paying off your student loan debts and/or other debts. Establish credit and maintain a healthy credit report. Start contributing to your 401(k), 403(b), Roth IRA, and the likes that your employer might be offering.”
(Sokha Yous, Mayo Employees Federal Credit Union)

Get advice from the experts.
“When it comes to how you buy a home, in case that’s high on your priority list, there are many different ways to go about that and you may be pleasantly surprised to find out how you can get that done. Consulting a lender at your favorite bank can be very enlightening if you haven’t taken that step yet. Then give yourself a break if you feel like you’re not where you want to be. Some people can buy homes right out of high school or college, and for others it may take some more time. There is no rule for when or even if you need to do that. The simplest and oldest pieces of advice are still solid. Save for emergencies, pay off debt, and prepare for your goals and retirement. It is most beneficial to get a handle on those things earlier than later, but as I mentioned before: Everyone’s story is different, and the best time to make your financial goals is right now. No matter where you are, consulting professionals for financial planning, retirement savings, and home financing is a key step to setting up those goals. Just know that whatever stage of life you’re at, it’s always a good time to buckle down and start planning ahead if you haven’t already.”
(Randy Brock, Wightman-Brock Real Estate Advisors)

Find financial stability.
“Each person and each family, of course, has different financial needs, circumstances, goals, and priorities. In the first phase, the goal could be to achieve financial stability by paying off student loans, buying a home, and striving to paying off the home mortgage early.”
(Nita Khosla, Edina Realty)

Save $1,000.
“Have at least $1,000 in savings for emergencies—things break down, folks get sick. Better yet, build to have three months in savings so you could pay your basic bills! (We all need to keep the lights on.) Open small savings accounts at credit unions and save $20-$50 per pay period for the A: Hawaii Fund, B: Car Repair, C: Vacation, Etc.”
(Colin Aldis, Emerald Financial Group)

Previous post American Express Personal Loans Review 2022
Next post Momentum builds for transparency on people’s salaries