Our lives are constantly changing as we age. The other thing that isn’t constant either is your finances because as time goes by, the changes in your life affect your financial goals.
As you go through life’s stages, like childhood, prime years, and old age, your finances also go through phases. These include the early years of your career, financial peak, and retirement.
It’s crucial to understand and prepare for these changes so that you transition through life stages while financially healthy.
Take a look at these tips to help you set financial goals through life stages:
Stage One: Financial Beginnings
The first stage of your financial life corresponds to the early years of your career. It’s a time when you are starting to earn your own money, whether little or a lot.
However, the challenge is that you are also learning the ropes when it comes to making financial decisions. During this time, you will probably make lots of mistakes, but it’s also a time to forge lifelong habits that will translate into healthy financial goals.
Here are tips to consider:
- This is the time to master budgeting and forging a healthy spending habit
- You may have more money but few expenses at this point. You’re in a good position to take risks, so try high-risk investments
- It’s the right time to start saving long term
- Try setting up various income-generating ventures
- Start paying off debts
Stage Two: Career Growth
The second stage of your financial life reflects your prime earning years. At this point, you are probably in your 30s and 40s and have established yourself in your profession.
Your career is probably at its peak, or you are earning a lot more from multiple income channels. However, at this stage of your life, you may have acquired more responsibility than you had in your 20s.
You probably have a family and are paying a mortgage or other loans. Basically, your expenses have increased. But this is also a critical point in your financial future. The decisions you make now have a lifelong impact.
Here are financial tips to consider:
- Maintain an effective budgeting plan
- Watch over large purchases that impact your wealth, like buying a home, a car, etc
- Start working with a financial expert to minimize the risks on your portfolio
- You likely have a family. It’s time to seriously consider health insurance
- If possible, max out your 401(k)
- Come up with a plan to repay loans and avoid new ones
- Work on your taxes with an expert
Stage Three: Approaching Retirement
At this stage of life, you are approaching old age and nearing retirement. These years are short, and you probably don’t have the energy and drive you used to have. Your children may be grown up with kids of their own.
Expenses at this stage may increase or decrease depending on your planning. Most likely, you don’t spend as much unless you have health issues, but your earning potential is probably not where it used to be.
During this stage, your financial decisions need to be on point to help prepare you for retirement.
Here are things to consider at this point in life:
- Significantly reduce the risk tolerance on your investments
- Work closely with your wealth management team
- Avoid large expenses like upgrading to a bigger home if it will heavily strain your wealth
- Maintain a healthy budget
- Take a life policy if you haven’t already
Stage Four: Retirement/Sunset Days!
Now that you are retired, it’s time to enjoy old age in peace. The last thing you need is financial worries after working for so long to secure your sunset days.
However, this is also the time to tread carefully, preserve your wealth, and ensure that it carries you to the end. You can’t afford high-risk investments now. In fact, you are better off leaving your wealth as is instead of trying to grow it.
Here are financial considerations to make at this stage:
- Your income flow isn’t what it used to be. Watch your spending and downsize if you can
- Maintain low-risk investments and try not to cash out
- You have experience with budgeting. Maintain a watchful eye to ensure your money outlives you
- Consider beneficiaries and write a will
- Spend wisely and enjoy financial freedom in retirement
Financial planning at different stages of life is meant to keep you secure through the changes that accompany life. It allows you to overcome challenges that would have destabilized your finances if you weren’t prepared.
Proper planning also secures your future at a time when you may not have the capacity to work anymore.