While some may argue investing strategies are rather straight forward and mathematical — and they wouldn't be incorrect — what is often glossed over are the formulaic changes inevitably implemented as different stages of life are hit.
Just as other priorities in life change based on age, family makeup, employment stability and long-term goals, the proportions and composition of your investing is likely to change.
A single, financially savvy woman who envisions a career-driven and independent life will have different financial goals and be willing to take on more risk than a single-income family of six. Furthermore, if the woman from the first example decides in her thirties to get married, downsize, have a family and reevaluate her long-term goals, her strategy toward financing is likely to change.
As you get on in age, your priorities shift. With those shifts, a shift in financial focus comes along as well.
Consider retirement funding.
As a fairly universal investing issue, preparing for retirement can be approached from all demographics. However, whether you start investing in your twenties for retirement or in your forties will dictate how you approach your savings strategy and spending plan.
While age clearly is one of the key factors in how much risk you are willing to burden, other factors alluded to above will also be factored into the equation.
Furthermore, your time-horizon — the amount of time you anticipate remaining from the present moment until you need to heavily rely on the money invested — also plays a large role in how you plan on handling your money in the meantime.
Here's What You Can Expect
While every life is unique and a single approach is unlikely to be effective across the board, there are some highly shared life experiences that should trigger an investment evaluation.
For example, between college and a first job, how you handle your income, basic savings threshold and investing will look very different from someone who is planning their retirement party after having been at the same 401(K) or pension-offering company for 45+ years.
Below are just a few of these life events and what you can expect to take into consideration at those stages.
- 1. First Job: This is the time to set up an initial retirement fund. Whether your employer offers a 401(K) or not, start off on the right foot by taking advantage of the time value of money. Remember that you don't need to contribute the max, but take advantage of matching if available and get your feet wet with mutual funds.
- 2. The Large Purchase: First-time homebuyers are typically about a decade into steady employment. While the tendency ahead of looking into such a colossal purchase is to stop other savings and concentrate all financial efforts toward that one goal, that can be detrimental. Instead of shifting focus completely, look longer-term and don't overlook your retirement contributions.
- 3. Kids: If you decide to add to your family with children, your focus naturally shifts to their future. While many parents prioritize their children's 529 or equivalent college savings plan, do not exchange your future for theirs by not maintaining your own savings strategy. Make sure you continue to aggressively save for yourself as well, and don't rely upon your children to support you as you age.
- 4. Approaching Retirement: As retirement inches closer, it's important to reevaluate your investment strategy and reduce risk. At this point, the tendency may be to shift too far conservatively and move all your money into bonds or something that feels "safe," however, many experts propose that your money needs to grow at a rate higher than that of inflation. So, tone down your risk, but don't become too conservative that it damages your growing power in the last few years.
Here Are Just 2 Approach For A Changing Investment Strategy
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