Life Cycle of Financial Planning

Life Cycle of Financial Planning Take Charge of Your Finances

Everybody Loves Raymond • Human Vacc Episode • http://www.youtube.com/watch?v=juLwo_gGptk • Raymond Tapes Over His Wedding Tape • http://www.youtube.com/watch?v=EdMyCLYdSFk • Brainstorm different events that are happening in each individual or couples life and record these events. • Circle the life events that require money.

Financial Planning Many people follow a similar financial pattern during their life BUT Everyone has an individualized financial plan. Financial planning is a tool used to achieve financial success based upon the development and implementation of financial goals.

Financial Plan Influences These factors can be expected and unexpected. Financial planning is influenced by many factors:

Financial Goals An essential step to creating a financial plan • Financial goals are specific objectives to be accomplished through financial planning • Financial goals should be SMART goals: • Specific • Measurable • Attainable • Realistic • Time Bound

SMART Financial Goals

Lifestyle Conditions

Financial Life Cycle • There is a typical life cycle pattern that applies to most people • Includes three stages • The amount of time it takes to move through the financial life cycle varies for every individual A life cycle is a series of stages in which an individual passes during his or her lifetime

An Individual’s Financial Life Cycle Single * Marriage * Start and Raise Family Approaching Retirement Years Retirement Years Stage 3: Wealth Distribution $ Stage 2: Wealth Accumulation Stage 1: Basic Wealth Protection Years of Age 0 20 30 40 50 60 70 80

An Individual’s Financial Life Cycle

Personal Financial Management Pyramid Wealth Distribution ‘giving it to your chosen ones’ Estate Planning Building Long Term Wealth: goal setting, retirement planning, investments Wealth Accumulation ‘giving it to yourself’ Building Financial Security: goal setting, savings plan, home ownership, children’s education Risk and Tax Management: goal setting, insurance, protection against economic loss, income tax reduction Basic Wealth Protection ‘quit giving it to others’ Credit and Debt Management: goal setting, credit use, avoiding credit abuse, debt reduction Cash Management: goal setting, emergency, cash reserve, record keeping, spending plans, net worth, and income-expense statements

Life Cycle Events Activity Identify someone you know in each category • People in certain age groups tend to have similar life cycle needs • What activities and events require financial planning during each stage? • High School Ages 13-17 • Young Adult Ages 18-24 • Adult With or Without Children Ages 25-34 • Working Parent or Adult Ages 35-44 • Midlife Ages 45-54 • Pre-Retirement Ages 55-64 • Retired Ages 65 and older

Traditional Age Group Financial Planning Needs • High School Ages 13 – 17 • Developing a plan for eventual independence • Preparing for career • Evaluating future financial needs and resources • Exploring financial systems – banks, etc. • Developing a personal system of record keeping

Traditional Age Group Financial Planning Needs • Young Adult Ages 18 – 24 • Establishing a household • Training for a career • Earning financial independence • Determining insurance needs • Establishing credit • Establishing savings • Creating a spending plan • Developing a personal financial identity • Developing a personal financial system

Traditional Age Group Financial Planning Needs • Adult With or Without Children Ages 25 – 34 • Child-bearing • Child-raising • Starting an education fund for children • Expanding career goals • Managing increased need for credit • Discussing and managing additional insurance needs • Creating a will • Maximizing financial management by all members of household

Traditional Age Group Financial Planning Needs • Working Adult or Parent Ages 35 – 44 • Upgrading career training • Building on children’s education fund • Developing protection needs for head-of-household • Need for greater income due to expanding needs • Establishing retirement goals

Traditional Age Group Financial Planning Needs • Midlife Ages 45 – 54 • Assisting with higher education for children • Investing • Updating retirement plans • Developing estate plans

Traditional Age Group Financial Planning Needs • Pre-Retirement Ages 55 – 64 • Consolidating assets • Planning future security • Re-evaluating property transfer • Investigating retirement part-time income or volunteer work • Evaluating expenses for retirement and current housing • Meeting responsibilities of ageing parents

Traditional Age Group Financial Planning Needs • Retired Ages 65 and older • Re-evaluating and adjusting living conditions and spending as related to health and income • Adjusting insurance programs for increasing risks • Acquiring assistance in management of personal and financial affairs • Finalizing estate plan • Finalizing will or letter of last instructions

True or False? Everyone has the same financial plan.

Life Cycle of Financial Planning