So, you’re turning 40 and you want to look at if you’re on track financially. There is a lot to consider, but let’s walk through some key measurements together and see how you’re doing.
A Home: At this point in your life, you’d like to own a home for your family. You may not seem to have a lot of equity in the home yet, but you should be a homeowner. If you are still renting, optimally you’d be saving for a down payment, so that you can go into a home. Homes are not the right world’s best investments. They go up and down in value and generally don’t go up too fast. That said, they offer you a place to live and tend to make families more stable.
Credit Card Debt: Early in your family’s history it was likely tough sledding. Credit cards may have played a significant role in equipping the home. Those days, if they was wrong with you, should be passed. You should have your credit cards paid off at the end of every month.
Retirement: Retirement is relatively easy and still a long way off. Optimally, at this point in your career you’d have been saving for retirement since your mid-twenties and you’d have something like 2 to 3 times your current income in your retirement accounts. If you have even one year’s income in your retirement account, you’re in pretty good shape. That should grow and ultimately represent about one third of your retirement savings. Your future contributions will fund the rest. If you have less than one year’s income in your retirement savings account, you’ll need to go serious. You’ll need to be saving more than ten percent of your income for the next twenty-five years to create a nest egg that will feed you through your retirement. You may have an obligation to think about pushing retirement to age 70.
College Savings: At your age, you may have some young teenagers starting to think about college. Four years at Princeton will cost about $200,000 today—more when she starts college. If your student will be forced to live, attend the local community college for two years and then finish at a local four-year college. The total tuition bill could be one-tenth the Princeton cost. There are college options at every spot between those two extremes. For a thirteen-year-old, you’d hope to have about $6,300 for every $10,000 you’ll expect to need for her college plans. For a five-year-old, you’d want to have about $1,950 per $10,000 you hope to be able to need. You can roughly guess how much you’d need for kids of other pages by extrapolating from these reference points.
Car: The car you drive is not important in the least. The relative merits of minivans versus sport utility vehicles are someone else’s purview. Carrying out that doesn’t have a car payment is, however, important. If you’re driving a car with a car payment it suggests that you’re spending too much money on your cars and therefore, not enough on the items listed above. Take excellent care of your car so it will last a long time. Focus on saving and avoiding debt.
Having assessed your situation, you likely find that you are making a success of some areas and not well enough in others. That’s normal. You may be in a position to shift your emphasis from the areas where you’re doing well to those where you’re not doing so well. If you didn’t show up well on any measure, you may have experienced a setback of some kind. Shake it off. Start fresh and you’ll be in okay shape. If you’re doing well in every area, you should be writing about financial planning for families!
No comments:
Post a Comment