For many people, it can be challenging to thrive financially when you live paycheck to paycheck. You may be sick of just getting by and want to have the funds necessary to celebrate life events and special occasions. If you’re ready to take control of your finances and have more financial freedom, there are a few life events that you need to plan for financially to ensure that you’re prepared.
Once you fall in love and find the person that you want to spend the rest of your life with, you may be ready to pop the question and begin planning your wedding. When you’re ready to propose, you’ll need to save an average of two months of your income for the ring. Although it can be easy to pay for the engagement ring on a credit card, incurring debt can be a bad way to start your marriage. Saving for the wedding is also necessary if you don’t have assistance from parents. Cut your budget and consider prolonging the engagement until you can afford the event.
Having children can be one of the most rewarding experiences that you have in life, but it can also be the most expensive. The estimated cost of raising a child in the U.S. is an average of $233,610 and is $14,000 per year. Delivering the child in a hospital can also be a substantial expense that ranges from $3,500 to $8,802. Although health insurance does cover part of the costs of your hospital stay, it likely won’t offer full coverage, making it necessary to have money saved to ensure that you can cover the expenses in full once the baby arrives.
Buying a House
Buying a house is one of the most expensive purchases that you’ll ever make, but it is a wise financial investment that can lead to a profit in the coming years. Buying a house requires plenty of preparation with your finances, making it necessary to maintain a high credit score by paying off your balances and avoiding late payments. You’ll also need to save an average of 20 percent of the price of the house for a down payment. If you’re approved for an FHA loan as a first-time buyer, you’ll only need 3.5 percent down. You’ll also need to save money for the closing costs.
Whether you want to further your own education or pay for college for your children, you’ll need to begin planning early for education. Consider investing in 529 plans to grow your money at a faster rate. Scholarships and financial assistance are also available and should be taken advantage of to avoid accumulating a significant amount of debt in student loans. You’ll also need to factor in inflation and how it can affect tuition rates in the coming years.
Starting a Business
Many people want to start a business to have more financial freedom and become their own boss. Starting a business is a common life event that will require several years of planning to ensure that you have the necessary funds available for all of the set-up fees. You’ll also need money to keep it running until you begin to make a profit. You can consider looking for investors but will ultimately need to have enough money to give yourself three years before you start to earn a living off of the business.
Your Children’s Weddings
Depending on the number of children that you have, it can be expensive to cover the costs of a wedding when each of your kids gets married. The average wedding is $28,000, making it necessary to begin saving as soon as possible to ensure that you don’t have to feel limited with the amount of funds that you provide. About 10 percent of parents dip into their retirement to pay for their children’s weddings, which can prolong how much time you spend working. Instead, saving in advance several years prior can allow you to plan ahead and avoid the stress of having to pay for the event.
Financial experts recommend planning for retirement in your 20s because it will allow you to maximize the power of compound interest that accumulates over time. Attempt to save at least 10 percent of your income while also signing up for your employer’s 401(k). The money will be put into your retirement fund without being taxed, which can accumulate quickly and allow you to have a larger nest egg once you reach the golden years. You may also want to look into your options for opening a self-directed IRA, which is a retirement account that gives you complete control over your investments. With a self-directed IRA, you can diversify your portfolio, which protects against economic fluctuations. Regardless of the option you choose, it’s important to start saving for retirement as soon as possible.
Estate planning is often neglected by many people but is crucial when you’re planning ahead. Without estate planning, your assets and property can get into the wrong hands. Planning for your death may not be fun to think about, but doing so can allow you to have complete control over who receives your money and assets once you pass away. You’ll need to create a last will, a living trust and put your health wishes in writing. You can have peace of mind knowing that your requests are honored when you create the right documents. Estate planning is beneficial because it can reduce the amount of taxes that need to be paid, it allows you to make your own funeral arrangements, it helps you avoid time and costs with the probate process and you can avoid any lawsuits that might occur between your family members.
Planning for the future may require time and energy, but it can also reduce a significant amount of stress throughout your life. By investing and saving for major life events, you can avoid debt and pay everything in full to ensure that each occasion doesn’t become a financial burden. Doing so just takes smart financial planning and some good financial advice.
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