PUBLISHED JAN 1, 2019

The Circle of Life: Investing at Different Life Stages

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The Story

We gave you the 411 to get ambitious about investing. Now you’re ready to pass go and collect $200. And prob way more than that. Because compound interest.

I’m still panicking.

In through your nose, out through your mouth. You got this. And if you need to phone a friend, Vanguard’s your new BFF.

Tell me more.

The co gives you the opportunity to find a personal advisor to help you figure out what to do – especially since one: everyone's situation is different. And two: how you approach investing will change based on what’s going on in your life at the time. This should help you get started...

For those big life moves...

We're about to put a ring on it...Mazel. Time to put your finances under a microscope. First, have the talk. Not that one. The one where you get v honest about everything from your salary, to your credit score, to your level of debt. Before you start investing together, you need to understand both of your money habits. Decide how you’re going to manage your cash. There are a lot of thoughts on the best way for couples to manage money. As in joint accounts, separate accounts, or a combo. Update your beneficiary (psst...the person who gets the funds if something happens to you) on things like life insurance or retirement accounts. Then: financial goals. Decide what they are and how you’re going to make them happen. Shorter term goals like going on vacation every year might mean making sure you’re both contributing to a high-interest savings account. A goal a few years down the line – like buying a house – or decades away – like saving for a kid’s college fund – will need different strategies.

I'm ready to not pay rent...Start planning now. If adding ‘homeowner’ to your resume is one of your goals, know that 20% is typically the magic number when it comes to your down payment. Although you can put down less. Either way, we’re talking a lot of cash. If you’re saving money for a house in the next few years, riskier investments like putting your money in the stock market aren’t the recommended way to go. You’re looking for a safer investment where your money can still grow. Some options: a high-interest savings account (we’re talking around a 2% interest rate), a money market account (a type of savings account that may earn even higher interest plus has other perks) or certificate of deposit (a type of savings account where you get a higher interest rate in exchange for agreeing not to touch the money for a certain period of time). These types of accounts are ideal for saving money you want to be able to access sooner rather than later.

Surprise, I'm expecting...Kids are expensive. In 18 years, they’ll go to college. Life moves at you fast. If you’re saving money for a baby, you might consider opening a college savings account, like a 529. It’s a state-sponsored plan that comes with certain tax benefits. Don’t worry, you don’t need to save 100% of the college bill. Some experts recommend saving about a third of expected costs. The rest will likely come from your income at the time plus any scholarships, grants, loans, etc. The motto for saving for college is pretty much the same as it is for all investing: the sooner you start, the better. But even if you wait until your child is in high school, it’s still worth starting to save.

For those big career moves...

I just started my first job...Pro tip: Don’t spend your first paycheck. Your future self will thank you. Step 1 is to prep for retirement (yes, already) by investing in your company’s 401(k). Especially if they match any portion of what you put in. If they don’t offer a 401(k), you can open an IRA. Either way, the sooner you start, the better. Get on this. When you’re setting up your account, you might see an option to invest in something called a target-date fund. Aka a fund that allocates your money into a different mix of stocks, bonds, and other investments based on what year you plan to retire (oh hey, class of 2055). When you’re young, it starts you out in the fast lane (because you can be riskier). And automatically changes things up as you get more grey hairs.

I just got a huge promotion...Congrats. If you’re bringing home more bacon (see: tips on negotiating your salary), now’s the time to have a heart-to-heart with all your financial accounts. Do not increase your spending. We repeat: do not increase your spending. The general wisdom here is that every time you get a raise, you should be using it to add to your retirement contribution and increase how much you set aside for automated savings deposits. Sounds boring. But trust us, it’s not when you start seeing it add up.

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Investing is intimidating. Take it one (life) step at a time. And know that you can always ask for help.

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