155 – Life’s 6 Financial Stages Part 1

Click below to listen to Episode 155 – Life’s 6 Financial Stages Part 1

Subscribe: Apple Podcasts | Spotify | Amazon Music | RSS | More

Life’s 6 Financial Stages Part 1

Discover which financial life stage you are in and how you can try to accomplish more with your money.

More episodes >>

In part one of two, Bob and Shawn discuss the first 3 of 6 financial life stages based on age, finances, and lifestyle. Even though not everyone will fit into these 6 financial life stages, most of us will! Whether you are in the beginning stages of just graduating college or towards the middle with kids that are graduating college themselves, there is definitely something for everyone in this episode.

Within every life stage are key financial takeaways and recommendations that Christian Financial Advisors has been able to extract from each. Some of these include avoiding debt, saving for a new home, and even getting your life insurance in place. Listen in to discover which financial life stage you are currently in and how you can get a better handle on your finances!

Mentioned In This Episode

Intro:
Welcome to Christian Financial Perspectives, where you’re invited to gain insight, wisdom, and knowledge about how Christians integrate their faith, life, and finances with a biblical worldview. Here’s your Christian Financial advisors host, Bob Barber and his co-host, Shawn Peters.

Shawn:
Welcome to another episode of Christian Financial Perspectives. We’re so glad that you joined us today, whether that’s on YouTube or listening to us right now in one of the many podcast directories. If you like content on financial topics of all kinds, but from a Christian or biblical worldview, we’d love for you to hit that subscribe button. Maybe like this video, it’ll bring more content like this to the top of your subscription feed, but also it’ll help other people who might be looking for the same kind of content. Don’t ask me how the algorithm works, I just know that it works. So anyway, today we’re gonna be covering part one of two for a series on life’s financial stages. And gonna go over to Bob for a little bit more of an intro on this.

Bob:
Well, Shawn, we’re gonna go over life’s six financial stages. I’m the old guy here, so I’ve already gone through three of them. I’m starting to head into my fourth. So, I’m over that halfway mark, I guess. I’m starting to come to that reality.

Shawn:
I’m firmly in stage two now.

Bob:
You are. So, yeah. And I think everyone’s going to relate to this, whether you’re in your twenties, thirties, forties, fifties, sixties, seventies, eighties, or even nineties. If you listen to our podcast.

Shawn:
If you’re in your eighties or nineties listening to our podcast, we appreciate you.

Bob:
Yeah, exactly.

Shawn:
You’re still going strong.

Bob:
You’re a high tech grandma.

Shawn:
That’s right.

Bob:
Watching us on YouTube or listening to us on our podcast. But Shawn, we do. We have some clients that are that age and they listen to us. So I gotta be careful about how I speak on this last stage.

Shawn:
It’ll be all in love.

Bob:
Yeah, exactly. That’s correct. And as we were thinking about these financial stages, you know what, some of the scriptures we use, sometimes we use them, a lot of them, over and over, but they apply. And I think the scripture from Ecclesiastes 3:1-7 really does apply through this about how there’s a time for everything.

Shawn:
You want me to go ahead and read that?

Bob:
Yeah. If you’ll read that for us.

Shawn:
So, like Bob said, Ecclesiastes 3:1-7 starting in verse one, “There is a time for everything and a season for every activity under the heavens. A time to be born and a time to die, a time to plant, and a time to uproot, a time to kill, and a time to heal. A time to tear down and a time to build, a time to weep, and a time to laugh, a time to mourn and a time to dance, a time to scatter stones, and a time to gather them. A time to embrace and a time to refrain from embracing, a time to search and a time to give up, a time to keep, and a time to throw away, a time to chair, and a time to mend, and a time to be silent and a time to speak.” Now, obviously, Bob, there’s probably something in there for everybody.

Bob:
There is, that’s right.

Shawn:
One part of that probably speaks to you, but I do know that very last part, probably for you and me, is a little hard sometimes, knowing when to be silent and when to speak.

Bob:
There’s reason we have two ears of one mouth, right?

Shawn:
Yeah. We seem to err on the time to speak probably more than anything else.

Bob:
Exactly. So, let’s get to stage one. What we call stage one in the financial planning process, and we look at this stage, and this is when you’re in your twenties to around your mid thirties.

Shawn:
Stage one, “The Beginning Years”.

Bob:
“The Beginning Years”. That’s the name of the stage that we named it. The beginning years. It’s your lowest earning years. You have very little to any savings or investments during this time.

Shawn:
Right outta high school kind of age up until mid thirties.

Bob:
Yeah. You’re getting outta college too, and you’re finding that spouse and getting married usually between the mid twenties and mid thirties nowadays. Now, Shawn, I know that your generation does everything later than my generation did. Rachael and I, we were having all our children in our mid twenties and down. So, this is very different, but I had to bring this to today. All right? There’s multiple jobs trying to figure out the best path for the career, you know? You see that.

Shawn:
Even if you went to school, sometimes you’re still trying to figure out what actually works.

Bob:
And you may not realize it, but your expenses and income, well you know your income’s low at this point. But you may not realize it, but your expenses are low, too.

Shawn:
Especially life insurance. It’s real, real inexpensive during that period.

Bob:
It sure is. But auto insurance can be a little higher.

Shawn:
It can be.

Bob:
Yeah. And anything that can be invested for retirement, will have many, many years to compound. And that’s the key here of looking at this, because we’re gonna get into each one of these and now we’re gonna get into the financial takeaway.

Shawn:
So for each stage, if this is the one that your ears perk up a little bit because you realize, oh, that’s the stage I’m in right now. We’re gonna have some financial takeaways. So something for you to be thinking about, trying to apply and use within your own life during this stage.

Bob:
Since this is a financial podcast.

Shawn:
Exactly. We figured it’d be good to have this. So the first financial takeaway on stage one, so your twenties to mid thirties, number one is start with a savings account for emergency savings. So what you want is you want at least three months of your expenses saved up. So in case of an emergency, you aren’t having to dip into anything. You might have started saving up for investing.

Bob:
And you don’t have to get in that credit card debt.

Shawn:
Exactly. And you can avoid that debt.

Bob:
It’s easy to get in that.

Shawn:
Now, minimum is three months, but we do recommend six months if you can get to that. And there is kind of an upper limit if you’re getting to where you’ve got 12 months of savings and emergency funds saved up, you’re probably doing overdoing it a little bit.

Bob:
I don’t think anybody’s gonna need to worry about that.

Shawn:
No, not during this stage.

Bob:
Mid twenties and mid thirties.

Shawn:
The second one. This is after you’ve got your emergency savings, not before, you want to start saving up as much as you can in maybe a separate, put it in a separate savings account to maybe use for down payment on a house, or maybe if you decide to go back to school and get your master, whatever it is. But the most common is saving up for a down payment on a house, because that’ll definitely help you in the long run. And then number three, like Bob was mentioning earlier, at this age, there’s a lot of time for that compounding…

Bob:
Compounding to occur.

Shawn:
Exactly. So open a growth mutual fund and add to it monthly, even if it’s $50 to a $100 a month, it’s still is good. Just start with something.

Bob:
Don’t think of it like a $100 a month pay, think of it like $3 a day.

Shawn:
That’s a good way to think of it.

Bob:
And the reason I say that, and I love my old friend Dave Ramsey from Financial Peace. That’s the cost of a, what do y’all call these, lattes?

Shawn:
Yes. You know. Come on. You know the word for lattes.

Bob:
Well, not really. I don’t drink that expensive coffee, but…

Shawn:
I don’t either.

Bob:
It’s a different language. But anyway, you can come up with that. A lot of people don’t think you can come up with $100 a month, but you can. You just have to look, curb your spending, and categorize it to more important things. And you’re gonna be glad you did this. A good rule thumb is to set aside 50% of your savings into a savings account and 50% into that investment account.

Shawn:
Okay. So, maybe for you, maybe when you look at your cash flow, you look at your budget and maybe you’ve got $500 a month max that you can put away, well, you want to put all that $500 to build up your emergency savings. Once you’ve got at least three months of the emergency savings, then you want to split it where you split that 50/50 and you put half of that for saving up for, say, that down payment and you put half of it into the investment account.

Bob:
And you want to avoid the use of debt, please hear me on this. I could say this 50 times, you’ve got to avoid the use of debt because these credit card balances are just such high interest.

Shawn:
Especially credit cards. So it’s not just debt, but avoiding…using a credit card…

Bob:
But right now, do you know the interest rate? I saw it recently. It’s 27%.

Shawn:
It’s up to 27.

Bob:
So, this is crazy. We better get going on these.

Shawn:
Just some clarification, Bob. But on the credit card, the key here is we’re not saying that don’t ever touch a credit card. What we’re saying to be very, very, very careful of is do not spend any more than you know you will be able to pay off in full every month. Because what gets you is carrying that balance over to that next month.

Bob:
I always say, if you can’t afford it now, what makes you think you’re gonna be able to afford it in three weeks.

Shawn:
Exactly. And then the last one for this stage, get your insurances in place. So life insurance, health insurance, disability insurance, all of those are incredibly cheap at this age. So, do it now.

Bob:
Now somebody’s just listening to this, in their twenties to mid thirties, they just went, are you crazy? I don’t have an extra dime. This is where they need financial advice. And you do, you don’t realize, do you think it’s tough now in your mid twenties to mid thirties, you just wait, it’s going to get a lot more expensive.

Shawn:
This is where you establish those good disciplines, and I think the key with that is look at what you’re making and look at what you have to spend money on so you can establish that budget.

Bob:
Okay. So let’s get to stage two and let’s list these off quickly or we’re gonna be here for the next 45 minutes.

Shawn:
We won’t do that to you guys. All right. So, stage two, “The Growing Years”.

Bob:
And that’s between, that’s when you’re in your mid thirties to forties. This is where you are right now, Shawn, and your earnings are increasing. This is normal.

Shawn:
And debt is increasing.

Bob:
And because your friends, you tell me how much your friends are earning and I’m like, yeah, really? But debt is increasing, too, because of housing. You just got the large vehicle, because you’re a growing family. You’re upsizing to those bigger cars to carry the kids and a larger home to house them in. Wait, Shawn, you’re not even there yet, but you’re about to get there. Your kids are gonna start getting involved in all these extracurricular activities. You’ve got a son and a daughter. So you…

Shawn:
There’s gonna be a lot going on.

Bob:
And there’s gonna be a lot. I mean, I got soccer, football, baseball, softball, basketball, music, band, ballet, art, swimming, gymnastics, cheerleading. Have I made your head spin enough here? Because they’re gonna be involved in one or two of those areas. And it is costly. It’s very costly. We called them back then, in my day, we called them suburban moms. I mean we had the big suburban back then, and Rachael was just going around from one to another to another. We had the big band family vacations. That’s all coming down the pipeline. And snow skiing in the mountains, they’re gonna want to go do that. You’ve got the summer vacations, the entertainment parks. That can be really costly. Go for the camping trips. I got camping trips.

Shawn:
Exactly.

Bob:
That’s a lot cheaper.

Shawn:
Well, that’s Jenna and I’s preference anyway. And it’s less expensive. So that was a lot to hit you with. But key here is earnings are going up, but usually the debt and expenses and just the cost of running the family is getting more expensive. Let’s do some financial takeaways.

Bob:
Real quick.

Shawn:
You may need to play some catch up. If you’ve been procrastinating up until this point, and you didn’t hear this podcast before you wer in this stage.

Bob:
If you’ve not done already, build up at least three months of living expenses into a savings account for emergencies only and to prevent dipping into investments accounts.

Shawn:
That’s right. And the third one, continue contributing to a growth fund or open one if you haven’t already. And add to it monthly. Now, the amount needs to be much higher than in that previous stage, stage one, the beginning years, because you don’t have as many years, on average, until retirement.

Bob:
Number four, max out the contributions to your employer sponsored plan to at least their match. Okay? For example, so if your employer is matching up to 3% of your salary into the employer plan, you put at least 3% because you’re getting a double on your investment immediately. If you’re putting in $100 and they’re putting in $100, that’s like free money. You’re making 100% return immediately. Number five.

Shawn:
Number five, continue to avoid the use of debt, especially again, especially carrying a balance on a credit card. What, it’s up 27%, right? But debt for a home purchase is okay. Just be sure that your monthly house payment is no more than 28% of your gross household income.

Bob:
You were asking me about that. And that’s the old school, by the way. That’s the old school. So you take…

Shawn:
Keeps you safe.

Bob:
So you take your monthly and you multiply that times 28%. That should be the max of your house payment. And then the maximum amount of all debt, monthly payments, credit card debt, home home debt, vehicle debt, should be no more than 33%. Now, that’s conservative. I realize that. Conservative. I’ve heard some people say 50%. That is strapping you. That’s way, way too much.

Shawn:
So, key with that Bob, is that’s the goal, right? We understand maybe you can’t get to there right now, but that’s the goal is you want to keep no more than 28% for the house payment and no more than 33% for all debts combined. And then number six, update your insurance policies to reflect current liabilities and income. So again, life, health, disability insurance is still relatively cheap at this age and in this stage of life. Again, with the growing family, there’s a very high chance that you’re gonna need higher coverage, especially for that life insurance and the disability. Because if something happens to you, you wanna make sure the family’s taken care of.

Bob:
And the seventh thing is so important at this age, Shawn, with your family growing and you. This financial takeaway should maybe be number one, having an estate plan in order. Or update it if you haven’t done one. So if you did an estate plan for yourself in your twenties and you had no children, now you have children, you need to update it. You need to update it.

Shawn:
Unless you want everything to go to the government, you know?

Bob:
Right. So let’s get to stage three. And stage three is “The Maturing Years” is what I call it. This is the mid forties to late fifties. And this is by far the most expensive stage of life that I’ve seen. Your earnings, though, are going way up during this time.

Shawn:
And usually start to peak out as well. So this is kind of like, this is gonna be about as good as it gets as far as your earning potential, typically. Kids are becoming teenagers.

Bob:
That’s costly because they’re wanting to drive cars.

Shawn:
So now you gotta have a car. Well, even if it’s a used one, there’s still gonna be insurance.

Bob:
The insurance is as much as the car.

Shawn:
Not gonna be cheap on those kids.

Bob:
Yep. I mean, they got, they’re gonna learn. And that’s a dangerous time.

Shawn:
And then we’ve also got high school graduation going on. Or you’ve got kids starting college and if you’re helping them with that, college ain’t cheap. You’ve got the oldest children might even be getting married at this point or finishing college.

Bob:
You have a daughter now, Shawn, so you’ll be paying for that marriage. So you’re not only gonna pay for the college, pay for the insurance for the vehicle. This is all at the same time, by the way. And then she’s gonna want to get married and you’re probably gonna have to pay for that. I’ve been there. I’ve been there. I understand all this. And on top of that, like what happened to Rachael. Rachael, in her mid fifties, is when that cancer cropped up. So health issues start cropping up about this point.

Shawn:
And unfortunately, these mortal bodies do start to wear out. And in this stage, you might have some health issues start coming up. So let’s get to the financial takeaways to be conscious of our time here. Right, Bob? So number one, max out the annual contributions to your retirement plan at work, not just a match.

Bob:
Yep. No longer the match.

Shawn:
Right. Because for one, at fifty, the amount you can add on that upper limit goes up. So for 2023 instead of $22,500 for fifty and older, you can do $30,000 per year.

Bob:
Yeah. And it was actually about $26,000 $27,000 this last year. So now it’s gone up to $30,000 if you’re above 50.

Shawn:
When you’re in your higher income earning period, that’s the other reason why we’re saying to max it out is say, at 50, most people are probably gonna retire at 65. That’s the goal. So, you’ve still got 15 years and if you’re maxing out that $30,000 a year, if you can…

Bob:
That’s on their side, by the way, that’s not including the match.

Shawn:
Exactly. All right. And so that’s just a huge benefit to help you reduce that taxable income and get more set aside for retirement. So number two.

Bob:
Beware of major risk and liability exposure also during this mid forties to late fifties. Especially a sickness like cancer, those kids driving into an accident. So this is a financial takeaway. Be sure that you have an adequate amount of coverage, insurance coverage, for liability and don’t just, for sure, don’t focus on just the best price for insurance. Focus on the amount of insurance. Going cheap is not the way to go. The way to go is to make sure that you have coverage and you’re gonna be glad you had that coverage when you need it. If you go for the cheap, it’s not gonna be there when you need it. It’s gonna be very little.

Shawn:
Number three, the focus on that is you want to make sure your risk is managed properly, not that you just get the cheapest cost.

Bob:
And that third financial takeaway.

Shawn:
Get out of debt completely and don’t go back into debt.

Bob:
That’s right.

Shawn:
So pay off the house, the cars during this period, and from there forward, pay cash going then on. If you can’t pay cash, don’t buy it yet.

Bob:
That’s because you’re no longer in your twenties and thirties where you have a lot of time to pay things off and recover. This is not the time, especially in your late fifties, it is not the time to go be borrowing money on buying expensive homes and expensive cars. Pay cash for those. I’ve never seen anybody hurt by paying cash.

Shawn:
And now, for the fourth and last one is retirement planning is crucial to know what you can retire on. You may need to wait till you’re mid or late sixties if you procrastinated in your earlier years. But it all depends on how much you want or need to retire on. And so many times, Bob, I know you’ve seen this over the years and even in the short period comparatively I’ve been here, people will talk about, well, what’s the return gonna be? What am I gonna make in the investments? That’s not really the question you need to answer. The question you need to answer is more of assuming certain expected rates of return, what is it that I’m wanting to be able to live on and at the rate I’m going right now, am I gonna meet that or not?

Bob:
The majority of the time, the wealth has not come from returns.

Shawn:
That’s right. It comes from due diligence and wisdom.

Bob:
Consistency. Exactly. So, there’s a lot there. There’s a lot there. I know these are just three of the financial stages. We’re gonna get into the next three financial stages in the next episode that we’re going to do. Every one of these stages, I’ve been through three of them and I’m heading into my fourth one now, and I hope I can do this until I’m 85 years old if my mind is still good, I’m gonna keep continuing to do this because when I’ve been through these, I can coach you through these. I know what you’ve… I’ve gone through them. So as a financial advisor, I can help coach you through that.

Shawn:
And you’ve coached a lot of people through some of those later stages as well. Even though you haven’t gone through those personally, you have been there side by side with people.

Bob:
That’s right. This is why you want a very experienced financial advisor, especially one that is fiduciary based, where you’re paying the advisor. They’re not getting paid on commissions. So we’re here to help.

Shawn:
Exactly. We’re here to help. So, if you wanna reach out to us, you can visit our website, www.christianfinancialadvisors.com. You can also call or text us during business hours at (830) 609-6986. Thank you so much for being here. Bob, any final words?

Bob:
No final words. We’ve had a lot.

Shawn:
Yeah, we have. And we apologize for going a little over. It’s just a lot to cover. So God bless and thank you so much for tuning in.

[CONCLUSION]

That’s all for now.

We invite you to listen to all of our past episodes covering many financial topics from a Christian Perspective. To make sure you don’t miss any of Bob’s upcoming episodes you can subscribe to Christian Financial Perspectives on iTunes, Google Play Music, Spotify, or Stitcher. To learn more about integrating your faith with your finances, visit ciswealth.com or call 830-609-6986.

[DISCLOSURES]

Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.