Your Financial Guide to Life

When it comes to all the ‘grown up’ documents and paperwork we need in life (disability insurance, life insurance, wills and retirement plans, for example), it can sometimes be hard to determine at what point in life these specific things are actually necessary.

“Planning for the future should start today,” says Bellaria Jimenez, CFP®, managing director of MetLife Solutions Group. “When it comes to saving, investing and insurance, the earlier you start, the more benefits you derive.”

To that end, we’ve put together a ‘Financial Guide to Life’ cheat sheet, if you will. Below are five of the more common policies and documents you’ll encounter in your adult life, along with when the experts suggest you actually look into getting them.

The policy: Life insurance

The appropriate age: As soon as you start working, or at least once you’re married.The reasoning: When you’re young and healthy, you’ll have the best chances at locking in a term life insurance policy at a relatively cheap rate. The odds are you won’t need the policy for the next few years, but it’s still better to have one and not need it than vice versa. Besides, “if you suddenly wake up at age 40 and decide, ‘Oh crap, I need to get life insurance because I don’t want to leave my family in a bind,’ your rates are going to be a lot higher than if you would have locked it in earlier, especially if you’ve developed any health issues along the way,” says Andy Brantner, CFP ®, The People’s Advisor.

If applying for a life insurance policy seems too much for you at the moment, Brantner suggests at the very least signing up for one once you have a family.

The policy: Disability insurance

The appropriate age: As soon as you start working.The reasoning: While life insurance is important, the truth is you’re much more likely to become disabled during your working years than you are to actually die. “In fact,” says Brantner, “according to the Social Security Administration, over 25% of today’s 20-year-olds will become disabled at some point before they retire.” Should you become unable to work because of an accident or disability, disability insurance will help replace your income over a specific period of time while you can’t work. As is the case with life insurance policies, being young and healthy means being accepted for better rates, which is why signing up for a policy as soon as possible is your best bet.

The policy: A will

The appropriate age: As soon as you start acquiring assets (generally once you start working and/or come into an inheritance).The reasoning: Without a will, the fate of your estate (aka all of your money, possessions and property) after your die will be left entirely up to the law, which may not be how you’d wish for things to be distributed. “A will provides you the opportunity to dictate how you want your assets distributed, and you may argue that you are young and have no assets, but you will,” says Jimenez. “It is of upmost importance to have one in place when you start acquiring assets that will not have a beneficiary assignment, or if you have collectibles or other hard assets.”

Of course a will isn’t a set-it-and-forget it type of document. As Brantner points out, it’s important to revisit your will at least annually, or when a major life event occurs (like marriage or having a child), to be sure your assets are still set to go exactly where you want them to go.

The policy: Guardianship documents

The appropriate age: When you are expecting your first child.The reasoning: Guardianship documents help legally establish your wishes for who you want to care for your children and raise them when it comes to both your finances and your values, says Jimenez. These can be two separate people (or sets of people) if you’d like (one in charge of the finances and the other to raise your children), but you’ll need to be sure to establish the difference in writing in your guardianship documents.

The policy: Supplementary retirement plans

The appropriate age: Once you’ve fully maximized any company-sponsored programs available.The reasoning: Everyone knows it’s important to start saving for retirement as soon as possible, but what does that actually mean? Jimenez suggests first doing whatever it takes to maximize any company-sponsored programs before looking into and obtaining supplementary plans. “The reason is that employer-sponsored plans, such as 401k and 403b, allow for pre-tax dollars to be invested and deferred,” she said. “This provides a tax advantage as you are, in essence, taxed only on the amount not deferred. In addition, your employer may match contributions you make to your company-sponsored retirement plan up to a certain limit.”

Once you’ve maxed out your company-sponsored retirement plans up to their matching contribution limits, then you might consider supplementary plans, if you have some disposal income left to play around with. For example, a Roth IRA (if your income qualifies you for it), allows you to defer an additional $5,500 in 2015 (if you’re under 50).

While it may seem like a lot to consider all at once, keep in mind that once most of these policies are put in place, all you’ll have to do is check in on them once a year to make sure things are still as you’d like them to be. After that, the peace of mind that they’ll provide — knowing that you’ve set up your financial life so that you’re properly taking care of both yourself and those you love most — will be priceless.