How You Should Financially Plan at Every Life Stage

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Most people confuse financial planning with a product you have to buy, invest in, or become part of some pyramid scheme. However, that’s not the case. Financial planning is assessing, managing, and building your finances to achieve your goals. It typically covers savings, insurance, retirement, investing, your estate, taxes, and how you can manage and reduce your debt.

On the surface, financial planning is about preparing for your future and making sure you gain financial stability and freedom. It can be challenging to go through and maintain, but mastering and applying financial planning is crucial as you can reap multiple benefits in the long run.

For instance, if you suddenly lost your job today, would you have enough to support yourself and your family until you find a new one? Emergencies and natural calamities are also other examples that can test your finances. There are endless unforeseen events that can take place, and if you don’t prepare for any of them, it’s possible to end up with a pile of debt.

Conversely, dream vacations and house renovations may be part of your life goals. But without proper financial planning, achieving these may be unfeasible or difficult. Whether you are young or old, there are many ways you can begin with financial planning.

How to Strategically Plan Financial Decisions at Each Life Stage

Change is the only consistent thing in the world. As you go through each life stage, you can encounter diverse situations and have varying priorities. The same applies to financial planning. The strategies and plans of a 20-year-old would most likely be different from that of a 50-year-old. Below are some guidelines you can follow as you start to plan financial decisions.

Early career

The beginning of your career is the ideal time to start financial planning because you can begin piecing up building blocks that will form your solid financial foundation. It’s most likely that you do not have dependents yet, so you can focus on setting goals, saving up, and taking risks. However, be aware of your limitations and only invest in products you’re familiar with and have done much research about.

Most individuals starting their careers would look into investments to build their wealth, but staying within your risk tolerance is essential. There’s a longer investment horizon at this stage, and you are more likely to be capable of weathering short-term market swings. However, as you explore investments, it’s crucial to practice budgeting.

Besides monthly bills, you could try allocating your savings and creating an emergency fund. Experts recommend saving at least 10% of your monthly earnings to have backup money that can cover expenses for three to six months. Availing of basic life and health insurance is a must. The earlier you embark on wise financial decisions, the easier it will be to form good spending habits and build savings.

Mid-career

At this life stage, it’s possible to consider starting a family, getting a car, or purchasing a house. It differs for everyone, but your income and monthly dues are most likely growing. Although you may have stable pay by this time, it’s essential to be more cautious with spending habits and decisions. Reduce riskier investments, especially if you have dependents like children or parents.

Like in the previous stage, you should still aim to have and preserve your savings, emergency funds, and insurance coverage. Settle these items and continue to follow budgeting practices. As you begin to have dependents, consider including them as beneficiaries or purchasing separate insurance plans.

Moreover, when you make commitments, consider weighing other factors. Always weigh your wants and short-term goals with your needs and long-term ambitions. If children are part of your plans, for example, now is the time to start building an education plan. It’s easy to lose track or be distracted by other things, but it’s always best to make financial decisions that support your goals.

Veteran at career

In this life stage, your priorities and perspective have most likely shifted. For those who have children, it’s time to reap the education plan you built in the previous years. On the other hand, some may have aging parents that need care and assistance. Others could be renovating their dream house, or starting to travel the world.

Whatever your situation and life plan, the latter part of your career is a time to prepare for retirement. You could start by assessing what you need and want during this time. Then look into different retirement plans and choose the best one for you. There are also products in the market that you can invest in now and serve as your income later.

Besides your retirement plans and needs, it’s vital to stick to a budget and not overspend on unnecessary things. As you come closer to your retirement stage, it’s best to keep up with wise financial decisions and think long-term. Consider what your children, parents, and you might need.

Retirement

At the last stop, you should be self-sufficient and free from debt. Retirement is the time to enjoy the perks you have carefully planned for in your younger years. Although you can reap the benefits such as living comfortably at home or traveling across the country or globe, you may still choose to make money work for you.

There are various products in the market with minimal risk. You may also explore other business ventures, like considering investing in real estate and then renting it out. However, the critical part of the retirement stage is ensuring debt-free and proceeding with caution on any investment. Watch out for scams to avoid any financial mishaps.

Financially Ready

Whichever life phase you are in right now, financial planning works best if you start as early as possible. Always begin with a thorough and honest assessment of your current state, then determine your goals. Set your financial goals, follow an appropriate budget, track your spending, and prepare funds as your backup plan for whatever situation.

As you go through life, carefully weigh and manage the risks you take for your investments. Making wise financial decisions is the key to securing a debt-free future and financial freedom. No matter what life stage you start financial planning in, remember to keep your long-term goals in mind and build toward that direction.