Budgeting for Every Season of Life


Financial wellness can mean different things at different life stages, but one principle is universal — you need to have and follow a budget!

Whether you are budgeting a small or large amount doesn’t matter. What matters is that you stay aware of how your budget should change as you age.

Here are several tips to keep you and your budget grounded at every age and stage.

Lay the Groundwork

When young adults graduate from college, they are typically leaving the nest literally and financially as they pursue their budding careers. This is the perfect time to plant some habits that can take root over the coming years.

  1. Write it down. Create a budget by writing down what you earn and what you spend. Whether you use a modern budgeting tool or old-fashioned paper and pencil, knowing how you are spending, saving and investing your hard-earned dollars is an empowering step. Once you’ve established your plan, be sure to monitor your monthly expenditures to stay on track and make changes if necessary.
  2. Spend less than you earn. Once you know how much remains, don’t buy more than you can afford. Seems simple, but it’s important (and not always easy) to put it into practice.
  3. Pay off student loans or consumer debt. This is one reason why you should spend less than you earn. Those debts are costing you more than you borrowed; pay them off quickly.
  4. Start an emergency fund. Start small for now. Try to save up to a $1,000 reserve as quickly as possible — so you’re not sunk when you need to replace a tire or a household appliance.
  5. Start contributing to a retirement plan either through your employer or with an Individual Retirement Account. A good guideline is to save 15% of your income in a retirement account. But even if you can contribute only a small percentage of your income, it can help make a difference as you work toward that goal. Think about areas where you can cut back on your budget — maybe making coffee at home instead of buying a cup on the way to work — because little expenses can truly add up. Also, thinking ahead can help you make good decisions when opportunities to save arise. If you receive a raise at work, immediately direct it to your retirement plan — that way, you won’t even miss it.

Adjust to Changes

Midlife earnings should be some of your highest, but this is also a season when many unexpected financial setbacks can take place. Have some tools in place to prevent your savings from depleting.

  1. Re-evaluate your budget. Whether you’ve received a raise or decided to have someone stay home, if your income changes, your budget should change, too. This is another prime opportunity to write out a budget, making adjustments where necessary.
  2. Pay off debts as quickly as you can and halt incurring any more. This is the time you need to become as financially free as possible so you can best prepare for the future.
  3. Build your emergency fund. Work toward having three to six months of essential expenses in savings should a major emergency occur — like a job loss or a health crisis.
  4. Increase your retirement contribution by a percentage — not a dollar amount — to help your savings keep pace with inflation. You will likely spend 20 or more years in retirement, and inflation may average 3% per year or more. By putting a percentage of your income into retirement savings automatically each month, increasing it as you can, you’re more likely to stay on track toward achieving your savings goal. Now, this may mean that whatever is getting in the way of saving for retirement has to wait, whether it is a new car, that long vacation or even the children’s college expenses. But your future self will appreciate the sacrifice.

Remain Consistent, but Flexible

If you’re nearing retirement, apply some of the same principles to your budget as you did in your early career, mixing in elements to keep your savings on track.

  1. Write it down — again. Write down what you have (savings), what you need (expenses), what you will continue to receive (income) and what you want to do (plans). Financial professionals say retirees will need 80% of their pre-retirement income in retirement.
  2. Keep saving. Maximize your retirement contributions every year, for as long as you can.
  3. Plan ahead. Review your overall financial plan periodically and consider how long you can live comfortably in retirement based on your savings so you can plan to retire at the right time.
  4. Delay retirement or work in post-retirement if needed. If you realize your current savings may not provide enough for a secure future, then be realistic about changing your retirement plans. Plus, delaying retirement may also give more time for your Social Security benefit to increase and your retirement account to grow.
  5. Prepare a sustainable retirement withdrawal strategy. You should take time before retirement to accurately calculate your retirement income need — or how much income you will need each month — as well as whether your retirement income sources will leave you with a surplus or shortfall. Please also call 1-888-98-GUIDE (1-888-984-8433) to schedule an appointment with a financial advisor.

No matter the season, a robust budgeting plan and well-cultivated habits can help you tend to your financial plan with care.

Need more help with your budgeting or savings strategy? Check out our helpful calculators to estimate your investment and savings goals.