Financial planning is an important part of securing your current lifestyle as well as preparing yourself for what you wish to do in your eventual retirement. And while this importance may look different during each stage of your life, it doesn’t make it any less important. Whether you call yourself a baby boomer, hail from the Gen Xers, or are a part of the youngest of those entering the world of financial planning, the millennials, there are certain things about financial planning that each generation should focus on to allow them to obtain their current and future goals.
The youngest of the group, the millennials are just reaching the time on their life where financial planning may have a long-lasting impact if started early. This generation is marked by savers. After enduring the recession of 2007-2008, they have learned not to take a good job and a solid nest egg for granted, and understand that one should prepare for possible tough times.
When it comes to financial planning for millennials, savings should start as early as possible. This means starting with positive saving behaviors such as contributing to a company 401(k), or setting up an IRA. Millennials should also start to get debt under control, such as student loan debt and build up an emergency fund in the event of a job loss or major life event.
While saving is the most important thing that a millennial might do, when it comes to investing, it is the time in life when a little risk is okay. When building a financial portfolio, don’t be afraid to throw in some higher-risk investments for the time being. They may pay off, and if they don’t your portfolio will have time to recover.
Gen Xers, now approaching mid-life have likely come to their peak earning years. So now that they have mostly reached their earning potential, it is time to grow their wealth. Heavily investing in growth assets helps Gen Xers get to where they want to be when retirement comes, but it is always a wise move to start planning your retirement income at this stage in life. See how much you have saved and list your expenses to see how much income you will need to generate in your retirement years. If there is a shortfall projected, now is the time to fill the gap.
Most Baby Boomers are making the transition into retired life, or soon will be. At this stage in life, your immediate financial planning concerns should be turning our retirement savings into retirement income. Planning may be difficult as you will need to plan out what you will need to sustain you for the rest of your life, which might be hard to determine how long that will be. You will want to consider whether or not it is possible to delay retirement or collect on social security to allow you to get the most out of your benefits. When continuing to invest, make sure that your portfolio stays more conservative as at this point in your life, your goal is to maintain your wealth. It is also a good time to begin your estate planning, so you know where your wealth is to be distributed when the time comes.
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