Financial priorities changes with changes in age, financial goals and sometimes due to changes in career. It also has an impact due to emergencies. Human life cycle goes through different stages and a fixed financial strategy may not be quite helpful on each stage. Let’s assume that if we have to divide life cycle in broad stages then I guess the following will be the three main stages-
Stage 1 [Age 25-35]:
This can be further categorized in two sub-stages as- Pre-Marriage & Post-Marriage. But the primary goal of is same – “savings & investments”.
Age 25-28, is the age when people generally complete their studies and on the verge to take dive into their careers. This is Pre-Marriage stage. Career growth along-with money is the main motive, which results in job hops to reach the ladder sooner. Initially people tend to be more focused on spending rather than saving. Remember, this is the perfect stage for a pure term insurance plan with accident cover (as there are no dependents). Starting the investments in some equities and mutual funds on a regular basis is recommended.
The next stage, i.e., Post-Marriage, responsibilities will start rolling out. We may call this stage as a step 1 settling stage. Obviously, an Initial year of settlement needs more money. “Home” is the primary and most common goal at this stage. At this stage the recommendation is to have investments in term insurance, pure equities with mutual funds and PPF. With the increase in responsibility, savings and investments should also increase”.
Stage 2 [Age 35-55]:
At this stage, people are generally started to settle down. So now, investments should be much more balanced. A correct mix of equity and debt helps one to achieve financial goals easily. The primary focus feature at this stage is “Growth of investments with savings”. At this stage kids’ education and retirement planning are the some of the main financial goals. These objectives are for long term and so your investments should be diversified in equities and debts instruments according to your age, available time and risk ability.
Stage 3 [Age 55-Retirement]:
At this stage, people have lesser responsibilities; kids are settled, debts have reduced. But, Health and Inflation are concerning. So now, the “security of investment with regular income” is the prima-focus. For that investments should be more in debt instruments which yields regular income with low risk.
I hope these stages and their impact on financial planning will be useful to someone. Please don’t forget to add your valuable comments. See you later!
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