At this point, you’ve embraced (or should have embraced) reality. You and many of your friends may be married, may have kids. Or, you may be single and focusing on you. Hopefully you have a long-term career, and are generally beginning to concentrate on mostly grown-up things. Where you are in the socioeconomic jungle is directly correlated to the decisions you made with money in your twenties. Now is the time to create your tunnel vision.
Re-evaluate your life insurance coverage after every life event from now on—like birth, death, an inheritance. Re-evaluate your risk tolerance. Don’t listen to televised investment evangelists. I have never met a widow and/or a beneficiary who ever complained about receiving too many life insurance benefits, but I have met a few who didn’t have enough. Cover every debt you have, and cover your lost income for a period as determined by a sound plan. Discuss this with your spouse, if you’re married, of course. There are no secrets when planning for your future. If you’re single, analyze who will receive your estate and hire an attorney to discuss your options. Beneficiaries can include your favorite charity, pet, relative, and the like.
Next, try to maximize your retirement contributions. If you can max out your contributions, you can start thinking about college savings plans for your children. You can borrow money for college, but generally, you can’t borrow money for your retirement. This may bother some folks, but I have always told my clients to pay themselves first. If paying for college is not on your agenda, then you likely have the option to save in excess of contributions made to your retirement plans (one of those good problems to have). Visit with a financial planner to discuss your options. There are plenty of sound financial strategies to saving after taxes.
This is the opportune time to develop a comprehensive financial plan. This term is thrown around quite a bit, so let’s define financial planning: A customized document of what you are trying to achieve in life, and how to financially get there. The key outcome with this process is finding answers to your financial questions, like:
When can I retire?
How much money will I need to fund my lifestyle?
What will my hobbies cost in retirement?
What are my values, and how do they play a role in my planning?
Who do I want my beneficiaries to be?
What if I pass away before my children are adults?
What if my children are spendthrifts?
What if I have no family or children?
The process is very personal and eye opening. When done right, it truly places your future in perspective. Create it, put it in motion, and update it regularly. This plan you create is a living and breathing document. Treat it that way.