The 7 Most Important Financial Moments of Your Life


We all have turning points in our life. They are moments when it seems like our future rests on what happens next. Perhaps it's when we met our spouse, or decided on what college to attend.

There are a number of moments like these that could have major impacts on our finances, depending on how we react and whether we are prepared. Consider these seven key moments or decisions and how they affect your financial future.

1. You Get Your First Credit Card

Right around the time you graduated high school, you probably got solicitations for credit cards in the mail. If you went to college, credit card companies may have stopped by your dorm or had a booth set up on campus. Credit card companies wanted you when you were young, and once they got you, they wouldn't let go. (See also: Best Credit Cards for College Students)

For those who haven't gotten a credit card yet, there's a lot you need to know before signing up. Yes, you will want to get a credit card or two in order to build a credit history. But learn to use them with caution. Do your own research and find the credit card that is best for you. (Look for the lowest interest rates and the best rewards.) When you use a credit card, pay your balance in full each time. Get an understanding of how high interest on credit card debt can pile up. If you start off with bad credit card habits, you may enter a debt spiral that will be hard to escape from, and it may have a ripple effect on every aspect of your financial life.

2. You Move Out

Everyone reaches a point in their life when they can no longer mooch off Mom and Dad. If you're lucky, your folks have been letting you shack up in their basement and raid their fridge even after you've long been able to support yourself. But at a certain point, it's time to leave the nest. This is when budgeting and watching your expenses becomes key. It's also a time when you may find that your ambitions are bigger than your finances can allow. Can you really afford that apartment in the city? Are you really planning to go clubbing and eating out with your friends every weekend?

It's tempting when you go out on your own to want to live it up, but this is a time when young people often find themselves in financial pickles. Learn to budget, spend sensibly, and understand that it's possible to live the fun, single life without going into debt.

3. You Get Your First Salaried Job

It was a great feeling to get that first paycheck as a teenager, but an even bigger moment was when you landed your first job that you consider part of your "career." This is the type of job that pays a salary rather than a living wage, and may even offer benefits like a 401K plan.

These first big jobs are when you start to actually think hard about where your money is going. You'll want to pay attention to your tax withholding to avoid paying too little or too much tax. You'll want to set a certain amount aside to pay down debt. Once that's taken care of, you'll want to invest. And don't forget about health and life insurance. A big job often means some big financial decisions. Are you ready?

4. You Have Your First Big Emergency

Maybe it's a serious illness. Maybe you totaled your car. Or maybe your heat furnace blew out unexpectedly. Whatever it is, it's going to cost you some money. Did you plan for this? Do you have an emergency fund of three to six months' worth of expenses? It's moments like these that test your financial discipline. Those that come through relatively unscathed are much better off in the long run. And even if you're not prepared this time, you learned enough to be prepared for the next emergency, which may be coming sooner than you think.

5. Your Child Is Born

So you have a new bundle of joy in the house. Wonderful news, and congrats! Are you financially prepared for this? Because kids aren't free. It costs at least $11,000 annually to raise a child in the United States, according to the USDA, and that total could be much higher depending on where you live and any child care costs. Having a child also may impact your investment choices. The good news is that there are tax credits for having children — but the bad news is that they hardly offset the added expenses.

Having a child is an amazing, life-altering event. Just be prepared for how those kids impact your finances.

6. You Decide to Buy a Home

Buying a home is one of the most exciting, but stressful decisions you will ever make. Before taking this plunge, there are a number of big financial questions you'll want to answer. How much money do you have saved for a down payment? How much money will you need to borrow? What's the interest rate and terms of the loan? These are key pieces of information that will impact how much you end up spending in housing each month. You'll get some nice tax breaks when you buy a home, but ideally, you want to spend no more than about one-third of your household income on housing. Otherwise, you may find yourself without enough cash to build an emergency fund, invest, or spend on other necessities.

7. It's Time to Retire

It's the moment of truth. All of the hard work, the saving, the investing. Do you have enough money to last another 20, 30, or even 40 years? Are your investments protected in case of a big market downturn? Do you have a plan for when you might not be able to care for yourself any longer?

This is a critical moment in your financial life, but it should be one that is free of drama if you made the right financial choices along the way.

Any key financial life moments we've overlooked? Tell us about them in comments!

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