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May 27, 2016

Financial Planning Through Life Stages: How to Prepare


Setting financial goals is admirable. Keeping your goals, amid life's changes, is another thing entirely. The objective should be to both set and maintain sound financial planning through life stages. Navigation through changing markets as well as your own changing financial needs through time presents the necessity for you to make some sound decisions along the way.

Our passage through life does take some similar paths among us all: graduation from college, marriage, children, and retirement. The following list of life stages gives a brief summary of some of those roads that you are likely to encounter and the resulting financial planning through life stages that can optimize your life's retirement goals.

Stage One

Your first paycheck. It has been a long slog to get to this place; college, job applications, and now actual work. There is probably college debt to be paid, a new car to be purchased, a new apartment lease to be acquired. Your work towards your financial planning through life stages is beginning.

  1. Budgeting may be a first step. Learning how far a paycheck will go is one of life's first financial lessons.
  2. Use of a wise borrowing strategy is key at this stage. Whether it is getting an auto loan, or borrowing from parents for the down payment on a lease, budgeting towards paying off those debts is part of this stage of monetary planning.
  3. Now is the time to set up savings goals. Establishing a tangible idea will provide the motivation needed for the discipline to save.
  4. Using your company's employee benefit plans are a good step toward implementation of your savings goals. Contributing to a company's 401(k) plan is a positive direction.

Stage Two

This is the stage where your income is rising, but so are your expenses. Marriage and children may be in the picture. A purchase of a home is likely. This is the time where financial planning through life stages can have a major impact on your lifestyle now as well as that in retirement.

  1. Budgeting continues to play a significant role in financial planning. Major life purchases, such as a home, new cars or new big-kid toys, should not stress existing assets.
  2. It is time to enlist the aid of a financial planner, CPA, wealth advisor, and insurance professional, if this has not already been done.
  3. Along with the professionals on your team, you will be considering college savings plans, or Section 529 Plans, for your children. You will be teaching your children how to save and manage money during this process.
  4. 401(k) contributions should be maxed out to take advantage of your employer's matching of your contribution.
  5. Again, with your wealth advisors, investments should be made to the risk tolerance level that meets with your investment goals and comfort level.
  6. Your insurance professional will help advise you as to the needed insurance to keep pace with your changing needs of family, work, and asset protection. Consideration of the purchase of Long Term Care insurance should be done at this point in time.
  7. Your will should include such items as a Power of Attorney, a Medical Durable Power of Attorney, and a medical directive. These documents should be reviewed at your annual meeting with all of your advisors.

Stage Three

Nearing retirement. Home stretch. There can be no mistakes now. This is the crucial juncture to ensure retirement readiness in your financial planning through life stages.

  1. Continued meetings with your wealth management team are crucial. Continued discussions regarding risk tolerance of investments along with medical insurance coverage, life insurance, wills and beneficiaries, asset allocations and management will need to take place. Are your assets performing in such a way as to meet your retirement goals?
  2. Budgeting income and expenses continues its importance. Are your short term financial goals meshing with your long term goals?
  3. Is your lifetime gifting to family and friends meeting with your financial objectives? Should you be looking at additional gifting as part of your estate tax plan?
  4. Consider starting Section 529 Plans for your grandchildren.
  5. Review any inheritance with your financial advisors. Proper investment of this wealth may provide the additional boost your retirement plans need.

Stage Four

Retirement. You have made it. Good health and financial security are two major considerations now.

  1. Continue to manage your investments carefully.
  2. Continue to meet with your investment advisor team at least regularly.
  3. Evaluate your budget. Is it working out for you to meet your living expenses? Does there need to be an adjustment to the plan? Does there need to be a downsizing of living arrangements?
  4. If a death of a spouse has occurred, make changes slowly. Meet with your wealth advisors and see what adjustments are needed in wills, trusts, beneficiaries and other financial and estate planning. Perhaps another downsizing will be considered at this time.
  5. Enjoy the fruits of your hard work in your successful financial planning through life stages.

Be prepared for all situations.

Something unplanned such as divorce, death, loss of a job or career can lead to devastating emotional as well as financial turmoil. Without previous proper financial planning, an unpleasant time in your life can change your financial situation dramatically.

  1. If you wait until you are back on your feet again to take a look at your investments, or begin to contribute to your company's 401(k) plan or establish an estate plan, sometimes it may be too late.
  2. Continue financial planning and careful budgeting as in Stage Two. Letting your team of wealth advisors know immediately of your life-changing event can bring in helpful suggestions and modifications needed during your re-building time.
  3. Post-devastating-event planning may involve re-establishing credit, retooling a budget and adjusting asset allocations. Items such as wills, beneficiaries and insurance coverage need to be reworked to reflect your new life status. Meeting with your advisor team is needed more frequently during this time.

At Smolin, we can provide the help you need in your successful navigation of financial planning through life stages. As wealth management advisors, our success is measured by your success.

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