Financial Planning – A Typical Life Cycle

Stages in financial planning

The normal stages of the life of an individual with respect to financial planning are as follows:

1. Childhood:

At this stage, the focus is on education and the person is in a dependable phase rather than in the earning. Potential sources of income are pocket money, scholarships or gifts.

2. Young Unmarried:

Perhaps the most exciting part of our lives and earnings start in this phase. It is important to note however that this is the stage which majorly decides how much financially secure and independent you would be over the period of life. Habits developed in childhood and this phase tend to remain forever with us. Hence, it is the most important time to start financial planning and investments in order to become more financially secure.

3. Young Married:

A cushion of assets and cash flow created in the previous phase can be a huge confidence booster while taking up the responsibilities. Expenses are likely to be high at this stage but careful planning with your financial advisor can set you to achieve your financial aspirations and goals. Also, at this stage a health insurance policy becomes necessary.

4. Married with Children:

Insurance needs- both life and health- increases with every child. Expenses for education will soar the sky and rise faster than inflation. Hence, your planning and investment in unmarried can really pay-off at this stage as well. A medium-term plan of home down-payment or foreign holiday can see investments in debentures for a while.

5. Pre-Retirement:

Your children would be earning by this stage and you can plan what kind of new lifestyle to lead with normal expenses.

6. Retirement:

Your investments have likely to paid of handsomely and your family surely would have a large corpus to meet sufficient needs.

This way the cycle goes on. And with careful planning and investments, you too can live off a quality life!

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