Having a sound overall financial strategy requires that you to recognize that your finances are in a constant state of change. Not only do financial markets fluctuate, but your financial needs also change over time. Luckily, it is easier to predict the changes in your financial life stages than it is to predict the direction of the financial markets.
Most individuals pass through three primary financial life stages as they age. Income levels, spending patterns, family situations and areas of financial concern, while not exactly predictable, tend to follow a pattern.
|Life Stage||Life Events||Financial Events|
|Stage One||Enter work force
|Develop financial habits
|Stage Two||Family grows
|More home purchases
Accumulation of wealth
Funding college educations
|Stage Three||Major promotion
Death of spouse
|Greater tax sensitivity
Stage One - Building a Financial Foundation
Young adults face the task of learning how to manage spending and saving within the constraint of their income level. Developing sound financial habits is critical. Here are some issues to consider.
Stage Two - During Your Prime Earning Years
This is often a time when your income is rising as well as expenses. Nicer homes, nicer cars and children can easily consume your increasing income. This is also the time when the financial decisions you make will have the greatest impact on the financial lifestyle you will enjoy during retirement. By now, you should have developed some savings and the expertise to make sound choices.
Stage Three - Nearing or During Retirement
These years can and should be some of the most enjoyable and fulfilling times of your life. If children and grandchildren are part of your life, having the financial ability to help them can be rewarding. A successful career, the freedom to live the retirement lifestyle of choice and a sense of satisfaction with what you have accomplished can make your "golden" years truly enjoyable. However, there are still financial issues that should be addressed.
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