Last time I discussed why financial planning is important. And I hope you learned something there.
For this post, I’ll dig deeper into financial planning to help you better understand how to make plans when it comes to your finances.
I’ll be discussing the 4 life stages of financial planning. It’s something that I learned in my short stint as a financial advisor (which is a story for another day).
And I want to share the basics of what I’ve learned starting the different stages of financial planning.
Let’s get into it!
1. Getting Started Stage
This is the stage where you’re just starting your career and building your place in the world. It’s usually the stage for fresh grads and those who have been working for up to 3 years so far.
In this stage, your obligations are likely minimal (unless you started a family early or you’re the breadwinner).
It’s the best time to start planning for your personal finance goals like getting a car, house/condo, etc. It’s also easier to start saving for emergency funds, get insurance, or invest.
Premiums are cheaper since you’re still young. Your investments will also have plenty of time to grow when you start early.
2. Moving Up Stage
The next stage is moving up and it’s the stage where your priorities start to change. You are likely more established in your career, earning you more money in the process.
But you’re also likely starting to have more obligations at this point. You’re likely about to get married or already in the process of starting a family.
This means your financial planning in this stage will be different. Family will be the priority here, as well as protecting yourself if you’re the breadwinner.
You will also focus on preparing for your kids’ education and other expenses that will come with having a family.
3. Preparing Ahead Stage
The preparing ahead stage is where you start to prepare for your retirement. You still have lots of years ahead of you, but you’ve likely established enough to protect your family financially.
Your kids are also growing up at this point and are becoming more independent. This means your priority at this point should be for you and your partner’s retirement, as well as your health.
Taking care of yourself is important. You also need to add more to your retirement fund, as well as set up a healthcare plan that you can use even after you retire.
4. Leaving A Legacy Stage
This is the stage where you’re near retirement or are already retired. Your kids are all grown up and you’re now enjoying the fruits of your labor.
Your priority at this stage is estate planning. You want to make sure the assets you have will be distributed properly to your sons and/or daughters once you’re gone.
Yes, this part is also important since there’s still a process to follow for inheritance. You want to ensure that you’ve taken care of the documentation and other things to avoid problems.
Always remember that in each stage of your life, there will be focus and priorities in your finances. You must know them to make a proper financial plan.
“Before anything else, preparation is the key to success” - Alexander Graham Bell.
Keep on Learning
The Unfussy Scholar
P.S. Please share this post with a friend if you enjoyed what you learned here 🙂
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