Facebook Twitter
June 21, 2017

6 Flexible Financial Strategies for 10 Life Events

401k advisor annapolis

Some core financial strategies work for investors during various stages of their lives.

By Gregory S. Ostrowski, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®,  Scarborough Capital Management  Previously appeared on US News & World Report and has been updated for clarity

Although it’s not technically an investment method, paying off debt is one of the first things to consider, because, if done correctly, it can save you a lot of money.

Congratulations, you have just graduated college. Or maybe you’re newly married. It could be that you just had a child. Perhaps you’re past that stage and you’re now funding your children’s higher-education expenses.

With all of the excitement that comes with some of life’s milestones, there’s an equal (and sometimes greater) level of stress that comes along with it, and it’s typically related to money. Each stage in life comes different financial needs that can vary widely. With that, your financial plan should allow for some flexibility, since we really don’t know exactly what we’ll need down the road.

Life events. Some (but certainly not all) of the life events that you’ll want to plan for are:

  • Paying off loans
  • Car and home repairs
  • Health care needs
  • Job loss
  • Getting married
  • Purchasing a home
  • Having children
  • Saving for your children’s college education
  • Caring for a parent
  • Retirement

Financial planning strategies. Here are some strategies on what to look for and how some can serve a purpose in addressing more than one life event.

1. Take advantage of a 401(k) for retirement. When you receive your diploma and get that first job, saving for retirement may be the last thing on your mind. But this is actually one of the most important times, financially, since you can build solid savings habits and pay off debt. Although it’s one of the life events that will be the furthest in the future, starting to save for retirement sooner than later is strongly recommended.

Contributing to a 401(k) plan may be challenging at first, since you may not have much money to invest when you’re just starting your career. But if your company matches up to a certain percentage, it’s imperative you contribute to get this “free money.” Make every effort to cut spending in other areas to take advantage of this benefit.

2. Paying off student loans, credit card debt or car loans. Although it’s not technically an investment method, paying off debt is one of the first things to consider, because, if done correctly, it can save you a lot of money down the road in terms of interest payments.

Focus on paying off any high-interest credit card debt or car loans first, then work on paying off your student loans. For example, to pay off a credit card balance of $3,000 with an interest rate of 14 percent per year 16 months earlier, only a slight payment increase from $60 per month to $70 per month would be needed. This would also yield a savings of about $350 in interest payments.

Additionally, you may be able to save from a tax advantage of student loans as well. According to IRS.gov, student loan interest may be tax-deductible if you meet certain criteria, including being below a certain modified-adjusted gross income. This potential deduction can be a nice bonus when Uncle Sam collects.

3. Establish an emergency fund for unforeseen expenses. As your first few paychecks start coming in, set some money aside in a checking account, or easily accessible savings account, in the event of your car breaking down, an unforeseen medical bill, home repairs or even a job loss. With this emergency fund established, you can have greater peace of mind to chase after your career dreams early on. Typically, having three to six months worth of expenses saved should be sufficient.

4. Certificates of deposit for short-term savings needs. If you’ve met the person of your dreams and are ready to settle down, it’s important to consider all of those larger expenses that will come up, such as a ring, a wedding or honeymoon. Although it’s tempting not to set anything aside up-front and then dip into your emergency fund to cover these expenses, you’ll be best-served by planning ahead.

If you’re looking for a short-term, low-risk investment, CDs may be good option. Even with interest rates near record lows, “cash is king” and it’s important to know the money you’ve worked hard to save will be there when you need it.

5. A 529 plan for more specific college savings. A 529 plan is an education-specific investment vehicle that comes with some potential benefits, one of which is with regards to taxes, as some states allow for contributions to be tax-deductible. Additionally, although you cannot claim contributions for a federal tax deduction, you can withdraw these funds without federal taxes when you use them for education-specific expenses.

Keep in mind that 529 plans can vary from state to state in terms of cost, investment options, risk and more.

6. Be aware of tax breaks when caring for a parent. The time may come when you have to take responsibility for the care of a parent. During this time, you may be eligible for some federal tax deductions if you and your parent meet certain criteria. According to an AARP article by Judi Hasson, updated last month, caregivers may be able to earn deductions on time spent caring for a dependent, expenses paid for a dependent’s medical costs and other various expenses, such as food, housing and even some home modifications.

It is highly recommended you consult with a tax professional to fully understand these guidelines, however, as there are many specific criteria which need to be met in order to be eligible.

Hopefully these strategies have given you some ideas on how to approach saving and planning for a multitude of life’s events. If you still have questions on which combination may be right for you, it may be worth it to seek out the help of a CERTIFIED FINANCIAL PLANNER™ professional.


Securities offered through SII Investments, Inc. (SII), Member FINRA, SIPC. Advisory Services offered through Scarborough Capital Management (SCM), a Registered Investment Adviser. SII & SCM are separate companies. Please consult with your representative to confirm on which company’s behalf services are being provided.  Neither SII nor SCM provide tax or legal advice.

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

Unlike CDs, investment securities will fluctuate in market value, do not offer a fixed rate of return and do not offer insured principal, as CD’s do with FDIC insurance.

Investors should consider carefully the investment objectives, risks, charges and expenses of the municipal fund before investing. This, as well as other important information, is contained in the official statement. Please read it carefully before investing or sending money. Withdrawals for non-qualified expenses may be subject to additional penalties and taxes. Consult your tax advisor regarding stated and federal consequences of the investment. Participation in a 529 plan does not guarantee that the contributions and investment return will be sufficient to cover future higher education expenses.

Article updated as of April 2017.

Contact us for a free consultation today! Contact Us