Think of financial planning as a GPS for your money, Don George says.
“GPS shows me how to get there, helps me get a good ETA of when I’m going to get there and helps me know where I am along the way,” says George, a financial coach at the Financial Empowerment Center at United Way of Summit and Medina.
Budgeting and planning can help you on your financial journey no matter when you begin.
United Way of Summit and Medina
The Financial Empowerment Center serves clients of all ages, including some high school students and retirees. Clients often get help with budgeting, improving credit scores, saving, navigating retirement and more. Even if some of those things seem distant, George recommends getting a head start.
“None of us have a crystal ball, so no plan is foolproof,” he says. “But usually the earlier you make plans, the better off you are.”
Start Early
George became a financial coach because he had trouble finding financial guidance when he didn’t have much money to invest.
“When I was in my mid- to late- 20s, and we were a growing family, I said, I don’t know how to do better with [my money],” he says. “There was nobody on the other side of the desk when I was looking for them. And I’m glad to be that person.”
If you’re in your 20s, it isn’t too soon to start. Some jumping-off points might be working towards saving money and making a budget. George recommends examining your monthly spending habits.
“Needs, actual needs — clothing, shelter, transportation — take care of those,” he says. “What do I have left to work with?”
After figuring that out, consider debts, then things like social events and restaurant dining and plan a set amount to spend on each. If you can, consider taking on a side hustle to earn some extra money to add to your budget. Then, based on your priorities, income and spending habits, form a plan for the next year to help you get on the right track.
“They need to think about tomorrow, rather than just today,” George says. “Your 20s is a great time to start investing for the future.”
Keep Moving
In your 30s, your financial priorities likely shift. Buying a house, managing debt and expanding your family might be on the horizon.
George recommends paying any small debts you have first to help rebuild your credit, giving the example of paying a small medical bill to get it out of the way. From there, work on keeping your credit usage below one-third. Making those moves could help you while house hunting.
“Having a solid credit score, two years of consistent employment history and good debt to income ratio,” George says, “those are the three big things that are looked at.”
If you have kids, it’s important to invest in both their present and future. George gives the example of paying for kids to be in activities like football and dance, while also working to save for after they graduate high school.
“I’m going to put $50 a month aside for them, then I’m probably skipping some fast food,” he says. “I have to do a tradeoff based on my values.”
Continue Building
What changes once you reach your 40s and 50s?
“It’s more of the same, but it starts to take on a little more intensity looking at the second half of life,” George says. “What does investing look like? How about these retirement plans?”
He recommends paying off any remaining debts and looking into any retirement plans that are offered through your job. Common options are 401(k)s, individual retirement accounts and Roth IRAs, and they should be considered in reference to what the tax rates are projected to be in the year you will retire. But more importantly, George says to find out if your employer matches retirement plan contributions.
“If there is a match, we always, if at all possible, at least participate to the point of the maximum match,” George says, offering the example of an employer matching 50 percent of your contribution. “I’m not getting a better return on any investment anywhere else. Let me take the free money. And let me start it at early as I can.”
Enjoy It
Finally, your hard work pays off.
Once you reach retirement age, know what you have saved and what your spending is likely to look like.
“Out of my resources — secured retirement funds, investments — can I create a stream of fixed income to meet my fixed expenses?” George says. “Then do I have money left over?”
Set aside funds for things that may come up as you age, like health care costs, health insurance, nursing home care and end-of-life planning. But remember that those aren’t the only reasons to set money aside.
“It’s not all gloom and doom,” George says. “Is it now time to take that world trip that I wanted to take? Is it time to now go travel across the country because that’s where the grandkids are?”
Even if you haven’t been consistent with planning, it’s never too late to start. It can benefit both you and your family down the road.
“It doesn’t matter where you are,” George says. “There’s no better time to get started off on the right foot than now.”
