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A financial plan is more of a marathon than a 50-yard dash. Everyone’s financial roadmap is ever-evolving. Periodic reexamination of your progress can help you make sure you don’t merely react to life’s unpredictable turns, but rather, proactively shape your financial future.

The overall process can be thought of as life-cycle financial planning. From youth to retirement, each chapter of life presents unique financial challenges and exciting opportunities.

What To Know and How To Plan for Each Life Stage

At its core, life-cycle financial planning serves as a personalized compass. It helps you navigate the nuanced financial requirements that characterize the different stages of life. Life-cycle planning is about knowing where you are—and, crucially, where you’re headed. It helps ensure that you’re financially equipped for each next stage of the journey ahead.

Consider your life’s overall financial arc as consisting of five pivotal phases:

  • Youthful exploration. From age 13 to 17
  • Blossoming adulthood. Age 18 to 25
  • Family and foundations. Age 26 to 45
  • Pre-retirement. Age 45 to 64
  • Retirement. Age 65 and older

At the same time, this arc overlaps with three periods in which people typically take different approaches to wealth:

  • Wealth initiation. The beginning of your career, marked by hard work and foundational financial blueprints
  • Wealth consolidation. Once you’ve built a solid base for generating income, in this second phase you increasingly focus on saving as much of that income as possible and making those savings grow, with an eye to living on them in retirement
  • Wealth fulfillment. Retirement, when you can enjoy the fruits of decades of work and planning

Diving Deeper Into Your Financial Life Stages

Let’s take a closer look at your five pivotal phases of life.

Start with your youthful exploration phase. The teenage years are synonymous with discovery. Alongside schoolwork, many teens take part-time jobs that offer an introduction to managing a budget and personal finance. Torn between saving and spending on enticements like the latest techie gizmo or trendy fashion, teenagers learn to make financial choices. This phase is foundational, teaching teens to distinguish between needs and wants.

In the blossoming adulthood phase, people typically take their first steps out into the world. Young adults strive for fiscal autonomy. This is an inflection point. Young adults choose career paths. They also make financial decisions that can influence the decades ahead: What percentage of my income goes to housing? How much can I afford to save? Should I start a 401(k) account, or do I have enough time to do that later?

Getting More Serious About Money

Life is often vibrant during the family and foundation years, frequently colored by family commitments and aspirations. The financial stakes of your decisions are higher. You’re better able to amass wealth. You’re more eager to preserve it. You think more about diversifying your investments. You start to weigh the value of buying insurance. You focus more on safeguarding assets and protecting loved ones.

You enter the fourth phase, your pre-retirement years, around age 45. Now that you’re inching toward retirement, you likely want to recalibrate your financial strategies. With responsibilities such as children’s education mostly behind you, you’ve got newfound financial latitude. Your focus is now firmly on building a retirement nest egg. You ponder strategic investments. You wonder more about comprehensive healthcare for your retirement years. Given the complexities of this stage, many people seek expert advice from a financial advisor.

Finally, you hit retirement. Your years of prudent planning finally start to pay off. It’s a time to enjoy the harvest while continuing to manage your finances wisely so your retirement years are comfortable and free of financial stress.

Charting Success in Life-Cycle Financial Planning

Transitioning through your life stages requires agility, foresight and adaptability. Your financial narrative should reflect your aspirations, responsibilities and capabilities, even as each of those evolves.

Graphics enhanced tools—like income generation calculators and asset allocation pie charts—can help you understand your financial progress.

These can offer a bird’s-eye view, highlighting potential areas of focus or concern. A human touch can help too. Periodic consultations with seasoned financial advisors can further ensure your fiscal tale remains aligned with your personal milestones, risk tolerance and time frame, as well as with global financial trends and emerging opportunities.

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Actionable Elements That Lead to Success

What are some of the actionable elements of life-cycle financial planning?

  1. Invest early. The sooner you start to put your money to work, the better your odds of success. The power of compounding interest is profound. Small, consistent investments during the early stages of life can lead to impressive long-term appreciation.
  2. Keep learning. Stay updated on financial trends and tools to seize both investment  and spending opportunities. Learning new tricks—and plain old keeping your eyes and ears open—equips you to make informed financial decisions.
  3. Reassess risk. As life progresses, risk appetite tends to diminish. For one thing, your investments have less and less time to recover from setbacks. As a result, you should reassess your risk tolerance and periodically adjust your portfolio’s level of risk accordingly.
  4. Manage debt. A cautious approach to debt, especially during your family-and-foundations stage, can prevent financial difficulties. And in general, paying down debt is always a good idea.
  5. Plan proactively. While retirement might seem a fantastically long way off during the early stages of your career, proactive planning can ensure a seamless and comfortable transition when the time finally comes to call it a career.
  6. Consult regularly. As you experience major life events—marriage, parenthood, career transitions—regular consultations with a financial advisor can provide clarity and direction. Embark on your financial RTP journey with confidence, yet make sure that expert guidance is available when you need it.

Reaching the Finish Line

Life-cycle financial planning is not merely about managing your finances. It is also about creating a financial strategy that weaves its way through all of the stages in your life. By staying proactive and informed, you can script a financial saga that resonates with aspirations, aligns with your evolving needs and ensures your financial security in retirement.

Whether it’s a career pivot, an addition to the family or investing for retirement, constant financial introspection is vital. To visualize and track the shifts in your financial picture, familiarize yourself with financial-mapping tools. Regular consultations with trusted financial advisors will make sure that your financial narrative makes sense given where you’d like to be as you achieve life’s milestones.


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