Financial planning provides the road map for your financial journey. During this journey, we go through four financial life stages: Initiation, Dependence, Growth, and Retirement. Financial planning must align with the financial stage. Let us discuss how planning can adapt to each stage.

The initiation stage

This is when you start earning and commence your financial journey. Start by listing your fixed expenses alongside your income and build a budget. Cultivate the habit of spending within your means. Avoid the lucrative debt traps offered by credit cards and lenders.

Begin by building an emergency fund, something that can come to your rescue should something unexpected happen. Opt for a term insurance early as the premiums will be low when you are young. Also, you can take advantage of the tax benefits.

It may appear absurd to start planning for your retirement, when you are starting out, but financially it is a wise move. As you have more time, you can build slowly and even choose some risky investment options if the returns warrant that.

The dependence stage

This second stage can be demanding as you will need to work on most of the financial elements simultaneously. You may have dependents and it would be good to include them in your life and health insurance plans.

Revisit your budgeting as your income and expenses would have gone through several changes. By now, you should be better at managing your savings and expenses (in that order).

You will now need to cater to many short-, mid- and long-term goals and your financial planning will have to be finetuned accordingly. Prefer a mixed bag of investments to meet your goals at different stages.

Another element that is critical at this stage is debt management. You should concentrate on clearing your current loans. Start new loans only for asset creation and only if you are confident of repaying those.

The growth stage

If you’ve been judicious in your financial planning and have stuck to the plan diligently, by now you should have a sound investment portfolio. However, you must remain mindful of how you spend. Your focus at this stage should be on maximising your savings and growing your wealth.

Rebalance your investment portfolio since many goals would be close to being fulfilled. Shift your focus to your retirement fund. Relook at your insurance plans to realign them to your current situation.

This is the right time to write your Will and make sure that all nominations on your investments are in place.

The retirement stage

The objective at this final stage is to contain your expenses and maintain a steady income. A relevant health insurance plan must be in force for yourself and your spouse.

Simplify your finances so that you do not want to bother about multiple accounts and investments. Organise, update, and consolidate all your financial documents and make them accessible.

Sound financial planning and execution would have earned you the right to live this stage in peace without having to worry about debts and day-to-day expenses (including medical).

If you plan and execute it right with some expert help, you will find that the whole exercise is not as daunting as it might have appeared at the beginning. The key is to concentrate on essential elements at the different stages of your life.

Make optimum use of your time, energy, and resources to accumulate wealth and lead a well-planned, stress-free life