Part VI: Financial Preparedness Checklists

This is Part VI of the guide, Understanding Loans and Credit At Every Stage of Life.

At different stages in our lives we face different financial requirements. At every stage, retirement planning and savings should be a consideration, as well as the liquidity of our assets should we need them in an emergency. It is also a good practice for anyone of working age to have a reserve equivalent to six months’ salary on hand in case of job loss.

The following checklists address each life stage that has been discussed, and may be helpful as you consider a lifetime of efficient financial planning. Note, this approach is also very useful when defining and monitoring efforts to improve your credit score. It all comes down to knowing where you are in life, what you need to be financially stable and always following up.

College Students

  • Prepare academically for college board testing by taking prep classes; better scores will maximize what colleges may offer you.
  • Investigate stand-alone scholarships and fellowships for additional financial aid that is not offered by your school.
  • If you must borrow money for tuition, borrow at the best interest rate and with the most flexible repayment options you can find.
  • Investigate the financial aid market every year and look for new alternatives to borrowing.
  • Live frugally and teach yourself financial discipline.
  • Learn to develop a monthly budget and stick to it.
  • Avoid aggressive student credit card scams.

Young Adults

  • Recognize that as a young working adult without a family yet, you are in a unique position to financially set yourself up for a lifetime.
  • Budget carefully; many experts suggest living like a college student for as long as possible.
  • Consider moving back home after college to save money.
  • Put aside 10% of your net income every month into a savings vehicle with compounding interest.
  • Spend no more than 20% of your monthly income on a vehicle.
  • Live within your means. A credit card is convenient and useful for emergency expenses, but you should be paying your credit card balance in full every month.
  • Pay your student loans as aggressively as possible and avoid minimum payments. This will improve your credit and pay off your debt faster.
  • If your employer offers matching on retirement savings plans, use this “free money” as advantageously as possible.
  • Spend money on medical insurance coverage. This is an investment hedge against unexpected medical costs, which can be staggering.
  • If you already have credit card debt, pay off the highest-interest card first and continue until you have eliminated this unnecessary debt, or consider a debt consolidation service.

Young Families

  • Invest in life insurance to protect your family in the event of your untimely death.
  • Consider disability income insurance, particularly if you are a single parent.
  • Acknowledge that having children can both decrease your earning power and your ability to save, and plan accordingly.
  • Consider whether it is better to rent or stay with family while you save a large down payment on a home purchase.
  • Make the largest down payment you can on your first home, as this will affect your mortgage payment most.
  • Shop around among mortgage lenders for the best interest rates and cheapest fees.
  • Choose to purchase a home that you will live in for at least 5 years.
  • Continue to live within your means.
  • Pay credit card debt in full every month, or establish a plan of action to reduce your credit card debt.
  • Investigate 529 plans for your children’s college expenses.
  • Begin planting the seeds of financial responsibility in your children’s lives by teaching them to save money.
  • Create a will and designate a financial power of attorney.

Retirement Planning

  • When your earnings are highest, typically in your 40s and 50s, invest heavily in your employer-sponsored retirement plan and use any matching benefits to their fullest advantage.
  • Consider divesting some of your savings into a Roth IRA after age 50.
  • Set aside a 6-month salary reserve that is easily liquidated in case of job loss.
  • Wait as long as possible before after age 62 to apply for Social Security benefits to maximize your monthly payments.
  • Consider IRAs as options for loans against your savings, but only in dire emergency.
  • Economize by avoiding luxury items and investing the money you save.
  • Consider downsizing your home and turning your paid-for house into a nest-egg financial cushion.
  • Consider short-term, high-yield investments to cover any gaps in your retirement savings.
  • Eliminate debt so that you can enjoy your retirement years.
  • Regularly review your financial goals and tweak as often as necessary to reach a comfortable retirement.
  • If you choose to enroll in Medicare, do so as soon as you reach your 65th birthday in order to avoid expensive penalties. Medicare Parts A, B and D carry enrollment periods just as private insurance companies do. If you do not enroll when you are first eligible, you must wait until the next enrollment period to enroll and pay an additional percentage on each of those premiums.

Continue to Part VII: Additional Financial Education Resources.
Back to Table of Contents.