Life Changing Personal Finance Milestones
As we always say here, personal finance is personal, and everyone will have a different set of priorities, resources, and learning experiences. Despite those inherent differences, I find that most people experience similar shifts in their perspective when it comes to 3 key life events. Today, we are going to discuss how those key life events impact many people's perspectives on personal finances. Let's jump in!
Getting a Job & Making Your Own Money
Your first job is not just a source of income; it's a rite of passage into the world of financial responsibility. Here's a couple of ways it changes your perspective on personal finance:
Income and Budgeting: Receiving a paycheck for the first time is exciting, but it also comes with the realization that you need to budget your earnings wisely. You'll begin to grasp the importance of allocating money for bills, groceries, transportation, and savings.
Taxes: The arrival of your first paycheck introduces you to the world of taxes. Understanding how much of your earnings are withheld for taxes can be an eye-opener. Many individuals become more interested in tax planning and optimizing their tax situation as a result.
Moving Out & Having Your Own Expenses
Leaving the nest and becoming financially independent is a significant milestone that can reshape your financial outlook:
Expense Management: Living on your own forces you to handle all your expenses, including rent or mortgage, utilities, groceries, and more. This newfound responsibility often leads to a more disciplined approach to managing your money. For many, this is the first time taking on the responsibility of these larger expenses and that exposure is the swift kick in the butt that some people need to start taking their finances seriously.
Emergency Fund: The unpredictability of life becomes evident when you're on your own. Without anyone else to help pay the bills, many people realize the value of having that savings cushion available. For a good number of people, this initial risk exposure is the thing that prompts them to really start saving for a rainy day or an emergency.
Buying a Home & Having a Mortgage
Purchasing a home is often the most significant financial decision in a person's life, reshaping their financial perspective in various ways. The most important perspective shift that I experienced was:
More Predictable Financials: For the longest time, I was aggressively saving for a down payment on a home because I didn’t know how much money would be needed in a volatile housing market. Once I had finally purchased a home, I had an idea of what my monthly payment for living would look like for the next 30 years. This shift from “I’m not sure how much I need to save, but more is better” to “I’ve locked this number in for the long term” completely changed my perspective. While not every aspect of home expenses are fixed, having the largest line item on my budget locked in has been a huge contributor to my financial planning.
While everyone's personal finance journey is different, it's important to understand how major life events change your circumstances and your relationship with money. By taking the time to understand how these events can shape your perspective, you have taken a step to making more informed decisions in the future.