The following post is a guest submission from a long time reader, Katie Carroll. Feel free to shoot me an email if you’re interested in submitting your personal money story!
I’ve always planned ahead. Even as a kid, I got my homework done before I went out to play (Yeah, I was one of those).
Now I have a good job, and my student loan debt is under control. My friends are even sane.
But what about my savings? Money is one of those things that is an issue in some way or another for most people, and most of us aren’t putting enough away in an emergency fund or for the future.
Here are six things you may not have thought about when planning the amount you need to have put away:
1. Even More School
I’m still paying off my undergrad loans, but I don’t think it’s too early to starting thinking about graduate school. Over time, advanced degree holders tend to out-earn employees with bachelor’s degrees and those who pursue continued education have a chance to earn even more.
I don’t want to wipe those long-term gains with graduate school debt. I’ll need to pay for tuition, fees and books. In addition, if I go to school full-time, I’ll have to think about living expenses, too. I’ll be done sooner, but I probably won’t be working.
I can’t count on getting a lot of free money, either. Employers have been cutting back on tuition contributions. Many colleges and universities are funneling less money into their grad programs for grants and assistantships as well.
It’s a good idea to plan how much of each paycheck can be put into a 529 savings plan. These contributions are tax-deferred — and when I do start pulling funds out to pay for school, the money is not counted as income. Sweet!
2. Tying the Knot
I’m not ready to get married yet — not by a long shot. But it doesn’t mean I don’t think about it from time to time.
In 2012, the average wedding cost more than $27,000. However, that’s including Kardashian-style shindigs as well as small, intimate affairs. Even so, the median cost was just over $18,000 — remember “median” from stats class? It’s smack in the middle. Half of the weddings cost more, and half cost less.
When the time comes, I’m thinking my significant other (whoever that’ll be) and I might open a savings account just to cover our special day. Once we decide the type of wedding we want, we can plan to put a little (or a lot) aside from every paycheck.
3. Bundle of Joy
While I’m fantasizing about my perfect wedding, I might as well think about what comes later —maybe way later. If we decide to have a baby, I’ll need maternity leave.
If I’m lucky, I’ll be eligible for the Family and Medical Leave Act of 1993, which mandates a 12-week unpaid leave. You heard that right: unpaid. This covers only about 60 percent of working women, though.
Some employers are more generous, but I can’t count on it. What if I want to stay home longer, too? This is another area where we’ll need to do some serious planning and saving.
OK, I’m not even married yet — or engaged or even close to it — but I’m worrying about divorce. In my defense, the divorce rate is currently about 45 percent. Fewer than half of all marriages end in divorce, but not by much.
Though that rate has been decreasing over the last few decades, it still seems pretty high to me. I don’t want to let a divorce ruin me financially — division of finances, lawyer fees or child support.
I’d like to be prepared. I don’t expect to go there, but does anyone, really?
5. Change Is Good
I love my current job. I worked hard to get here and spent a lot of money on my education. That doesn’t mean I’m locked into this career for the rest of my life, though.
I’m not looking for a change now, but who knows what the future will bring?
Chances are, it’ll bring change. Over 85 percent of employed people who are actively seeking jobs are looking for a different occupation.
That concerns me. I’ve spent all this money on my undergrad degree. I’m thinking about graduate school, and then statistics tell me I’ll probably change fields?
I may well need savings for that. Switching careers can be expensive. Additional training or education, a salary cut, a move — these possibilities add up. Fast.
6. Everyone Ages
Of course, I need to save for the big R: retirement. How much I’ll need depends on my health and the costs of any health care, as well as retirement location and plans.
The sooner I start saving, the better. That’s just math. My savings will earn more interest the longer they’re in the bank. Simple.
And I’m not the only one who will get old. My parents are aging, too, and that worries me. One study indicates that 45 percent of adult workers believe that, in the future, they’ll be responsible for their aging parents’ care — and some of that responsibility is financial. Yikes.
It’s pretty much impossible to know what the future will hold, but having some savings can help alleviate the pressure of the unknown — at least financially.
Katie Carroll is a 20-something working professional who just recently joined the freelance writing bandwagon. She is obsessed with Harry Potter and always enjoys a good cup of coffee.