7 Life events you should financially prepare for


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Many of the major events we experience in life, both planned or unplanned, can have a significant financial impact on our lives. From getting your first job to sending your kids to college, having some financial know-how can help to ensure these moments are full of joy, rather than worry.


Here are some steps you can take (some right away) that can help ease life’s major transitions, and help you build wealth throughout your life.


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Related: Pros & cons of paying off student loans early

1. Your first job

You’re fresh out of college and have just been offered your first job. This is where your financial journey really begins. And, since you are likely earning more money than you ever have, it’s important to have a plan for how you will use that money wisely.


If your employer offers a 401(k) for retirement, you may want to consider having at least some money taken out of each paycheck each cycle and put into this fund.


Once you get your first paycheck, and can see exactly how much money you are taking home (after all deductions, including retirement, and taxes are taken out), you may want to set up a simple budget. This will help you get the most out of your salary and build some financial stability.


This simply entails listing all of your essential monthly expenses, such as housing, food, and minimum payments on debts or loans, and then subtracting them from your monthly take-home pay to see how much you have left over to play with.


You may also want to include saving as one of your “essential” monthly expenses, and then determine an amount you can set aside each month into a separate savings account. It’s perfectly fine to start small–even putting a little bit of money aside each month will start to add up over time.


This savings account can help you build an emergency fund (generally three to six months of living expenses). Having financial backup can help to ensure that if you should have a large, unexpected expense, you could cover it without having to rely on high-interest credit cards.


Once you have a comfortable emergency fund, you may then want to start working on other savings for other goals, such as buying a car or other major item you are hoping to buy in the next few months or years.

2. Paying off student loans

Student loan payments can be a drag on your monthly budget, especially if you are trying to save toward other financial goals, like buying a home or paying for your kids’ college education.


One of the best ways to pay off student loans is to pay more than the minimum each month. The more you pay toward your loans, the less interest you’ll owe — and the quicker the balance will disappear.


There’s typically no penalty for paying student loans early or paying more than the minimum. However, there is a caveat with prepayment: Student loan servicers, which collect your bill, may apply the extra amount to the next month’s payment. The problem with that is that it advances your due date, but it won’t help you pay off student loans faster. That’s why it can be a good idea to tell your servicer–either online, by phone or by mail–to apply overpayments to your current balance, and to keep next month’s due date as planned.


Another option you may want to look into refinancing your student loans. This can help you pay off student loans fast without making extra payments. Refinancing replaces multiple student loans with a single private loan, ideally at a lower interest rate. To speed up repayment, it’s a good idea to choose a new loan term that’s less than what’s left on your current loans.


Keep in mind, however, when you refinance a federal student loan into a private loan, however, you may lose the benefits and protections that come with a federal loan, like deferment and public service-based loan forgiveness.

3. Buying a car

Buying your first car can be an exciting experience. And, you might want to rush to the nearest dealer and purchase a shiny, new model right away. However, saving up for a car before you buy minimizes the amount you have to borrow, and can save you a substantial amount in interest.


To get a sense of how much you need to save for a down payment, you can research some car makes and models that might suit you and get a sense of prices for both new and used cars. You can then zero in on a price range you can afford and calculate the down payment. A good rule of thumb is to put 20% down on a new vehicle and 10% down on a used vehicle.


Making a higher down payment helps you qualify for a loan, and it can earn you a lower interest rate and result in more affordable monthly payments.


Once you know how much to save, the next step is to find a good place to start saving. Good options include: a money market account, online savings account, or cash management fund. These accounts can enable you to earn more interest than a standard checking account but allow you to access the money when you are ready to buy that car.

4. Buying a home

For many people, buying a home is the biggest purchase they will ever make. So, it’s important to prepare for it.

A great first step is to figure out how much house you can afford to buy. You can come up with a target price range based on the area you want to live in, details about the type of home you want, and how much you’re comfortable spending on a monthly mortgage payment. This exercise will help you understand how much you need to save and roughly how long it will take you to save enough. Mortgage lenders and online mortgage calculators can also help you decide the absolute maximum you can afford to spend on your house.


One common rule of thumb is that your home payment (including loan payment, property taxes and homeowners insurance) should take up no more than a third of gross pay (your monthly paycheck amount before taxes and deductions are taken out). However, this can vary depending on the cost of housing in your area.


Once you have a target home price, you can start saving for a down payment. Many mortgage lenders require you to make an upfront deposit of up to 20% of your home’s cost.


To get there, you can think about when you want to buy a home, and then work backward to determine how much you need to save each month to reach this goal.


As with car savings, a good place to save for a home is a high-interest savings account, such as a money market account, online savings account, or cash management account.

5. Changing jobs

At some point during your career, you may change jobs. Generally, this can be a smart financial and professional move, but changing jobs is still something you’ll want to plan for financially.


You’ll likely be eligible for a new set of employee benefits, including health insurance. However, it will probably be up to you to ensure that you have health coverage during the transition. To avoid any gaps, it’s a good idea to ask your new employer how soon you will be able to qualify for healthcare.


You may also want to create a plan for transferring your 401(k) and health savings account (HSA) to your new accounts. Rolling them over is generally a simple process, but you may want to contact your previous employer for guidance. Also if you have a flexible spending account (FSA), you may need to submit all eligible expenses for reimbursement under your old program before you leave your current job.

It can be a good idea to check with your company’s HR department to find out whether or not you have a grace period for submission.


And, since you may be earning a higher salary, you may also want to re-examine your budget, and perhaps do some tweaking–such as funneling a bit more money into your retirement fund and/or savings account each month.

6. Saving for your kids’ college

Next to buying a home, child education expenses are among the biggest you may have in your lifetime. Just like retirement: it’s never too early to start saving for college. But even if you put it off, you can still help cover most or all of those college costs with wise saving and investing.


While predicting how much college will be for a kindergartener may be difficult, it gets a little easier the older your kids get. However, you can find current college costs and predictors for future college tuition costs online and use that as a benchmark for your savings.


One great place to start building education savings is in a 529. These are savings plans, usually sponsored by state governments, that encourage saving for future education costs. They are often tax-friendly, in that many states will let you deduct your contribution from your state income tax. Even better, when you withdraw the money for college, the money will not be federally taxed. That means, any growth (or money in the account that you didn’t put in) is not taxed, which can be a significant advantage over traditional investment accounts.


You can put money into your own state’s 529, or any other state’s plan. Whatever you choose, consider making monthly contributions automatic, so that your bank transfers the money right into the 529 on the same day each month.


One way to ease saving for college is to use smaller life transitions to help fund your education savings plan. When your child no longer needs daycare or preschool, for example, you could funnel what you were paying for that into your account.

7. Retirement

Retirement may seem far away, but it can come up faster than you expect and, if you’re unprepared, you may struggle financially. Saving for retirement early can provide peace of mind later. And, the earlier you start saving for retirement, the less you’ll have to put away, thanks to the magic compounding interest (which means the interest you earn on your investments also earns interest).


While it can seem impossible to predict how much money you’ll need once you retire, some financial experts recommend this rule of thumb: Aim to save at least 15% of your pre-tax income each year from age 25 to 67. If you start later, you would want to up those percentages.


Fortunately, you can get Uncle Sam to help. By contributing to tax-advantaged savings accounts like traditional 401(k)s and Individual Retirement Accounts (IRAs), your contributions are made before tax, reducing your current taxable income. That means you get a tax break the year you contribute. Plus, that money can grow tax-free until you withdraw it in retirement, when it will be taxed as ordinary income (and at retirement time, you may be in a lower tax bracket).


With Roth 401(k)s and IRAs, your contributions are after tax, but you can withdraw the money tax-free in retirement (assuming certain conditions are met). If you are contributing to 401(k) at work and your employer offers matching funds, you may want to increase your automatic contributions at least to that level–this is effectively “free” money.

The takeaway

Throughout your life, you will likely experience some significant events and milestones that can have a major impact on your financial well-being. The better prepared you are for these transitions, the less stressful and more enjoyable they can be.


Learn more: 

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.


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Why having emergency savings should be a financial priority


Life can be unpredictable, and financial setbacks can crop up at any time–whether that’s a job loss, medical or dental bills, a fender bender or a major appliance that suddenly stops working.


An emergency savings fund is a lump sum of cash set aside to cover any unanticipated expenses or financial emergencies that may come your way.


Besides offering peace of mind, an emergency fund can help save you from having to rely on high interest debt options, such as credit cards or unsecured loans, or needing to undermine your future security by tapping into retirement funds.


If you don’t yet have any emergency savings set aside, however, there’s no need to stress. Below, we break down why an emergency fund can be a key part of financial planning, how large it should be and how to start building it up.


Related: Should I have an emergency fund?



designer491 / istockphoto


An emergency fund can be thought of as a kind of self-funded insurance policy. Instead of paying an insurance company to back you up in case something goes wrong, you’re paying yourself by setting aside these funds for the future.


Having a financial back-up comes with a range of benefits. Below are some of the key perks of having an ample emergency fund.


designer491 / istockphoto


Yes, there may be other ways to quickly access cash to cover the cost of an emergency, such as credit cards, unsecured loans, home equity lines of credit or pulling from other sayings, like retirement funds.


But these options typically come at high cost in the form of high interest fees or penalties. Though there are many reasons for having an emergency fund, preventing debt is among the most important.


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Living without a safety net and simply hoping to get by without running into a crisis can cause you to worry about what would happen if you got hit with a large, unanticipated expense.


Being prepared with an emergency fund, on the other hand, can give you a sense of confidence that you can tackle any of life’s unexpected events without experiencing financial hardship.


Ridofranz / Getty Images


Unemployment benefits, if you are entitled to them, can help you afford some of your daily expenses, but generally it’s not enough to cover your entire cost of living.


If you have an emergency fund, you can tap into it to cover the cost of everyday expenses, like utility bills, groceries, and insurance payments, while you’re unemployed.


Starting an emergency fund also gives you the freedom to leave a job you dislike by choice, without having to secure a new job first.


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Having extra cash set aside in an emergency fund helps keep that money out of sight, and also out of mind.


Keeping the money out of your immediate reach can make you less likely to spend it on a whim, no matter how much you’d like to.


Also by having a separate emergency account, you’ll know exactly how much you have—and how much you may still need to save.


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The size of your emergency fund will depend on your income and expenses, but a common rule of thumb is to have enough money to cover three to six months of living expenses.


If you are part of a two-income household, three months of expenses may be sufficient. If you live alone, or you are the only earner in the household, on the other hand, you may want to shoot for closer to six months.


To calculate what that amounts to, you may want to look through bank and credit card statements for the past few months and list all of your essential monthly expenses, such as housing, food, insurance, utilities, transportation, and debt.


You would not need to include expenses for anything you’d cut from your monthly budget in the event of a job loss or other financial emergency, such as dining out, entertainment, vacations, nonessential shopping or saving for college.


Once you’ve assessed the minimum it costs for you to live for a month, you can multiply that number by however many months you feel would give you a comfortable financial cushion.


If the number you come up with seems intimidating, it can help to keep in mind that you don’t have to create your emergency fund overnight.


You can build it slowly by stashing away small amounts on a regular basis, like every paycheck or every month. If you keep it up, over time you’ll eventually meet your goal.




It can be a good idea to keep your emergency fund in a separate, safe, and liquid account, rather than mixed in with your spending money or other savings. This way you know it’s earmarked for a specific purpose.


Good places to build your emergency fund include: a high-yield savings account, online savings account, money market account, or a cash management account.


These accounts can help your savings grow (since interest tends to be higher than with a traditional savings account), but also keep your money liquid–meaning you can access the money when you need it.




A good first step to starting, and building, your emergency fund is to create a simple budget. This entails looking at what is currently coming in (i.e., your take-home income) and currently going out (all of your essential and nonessential spending).


If there isn’t much leftover after subtracting spending from income to siphon into savings, you may want to rejigger your spending.


You can do this by honing in on nonessential expenses and seeing where you may be able to cut back, such as eating out less often, ditching a pricy cable package, or getting rid of subscriptions and services you no longer value.


Using your budget, you can then come up with a set amount of money (and it’s fine to start small) that you can put into your emergency fund each month.


It can be a good idea to automate your savings process by setting up a recurring deposit from your checking into your emergency fund savings account on the same day each month, perhaps after your paycheck gets deposited.


If you receive an unexpected lump sum of cash, such as a tax refund, bonus, inheritance, or cash gift, you might consider putting at least a part of it into your emergency fund to help you reach your goal faster.




Without savings, a financial shock—even minor—could set you back, and if it turns into debt, it can potentially have a lasting impact.


That’s why it can be wise to make building an emergency fund one of your highest savings priorities.


Even if you’re currently living paycheck to paycheck, you may be able to slowly start building a buffer against emergency expenses.


Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org


SoFi Money
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA /SIPC. Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.





Farknot_Architect / istockphoto


Featured Image Credit: William_Potter/istockphoto.