Personal Finance: Financial Life Stages

When it comes to personal finance everyone has different needs at their respective life stages. So, let’s understand what are these different life stages and how should you approach your investment and risk in these life stages.

1. First Job
This is the life stage where you have just started your career and usually have no dependents and in turn have no responsibilities towards them. So, here you try to accumulate all the possible assets like bike, car, home, etc. However, while doing all these things people forget to save as well. It is always prudent to save before you spend. This is the time when you should properly streamline your cashflows which would make your life easier in different life stages. So, before spending saving anywhere between 10 per cent to 20 per cent of your income would help you to first build your emergency corpus. Then consider saving and investing some amount for your retirement and investment for which you would have to increase with the increase in your salary. Then with the remaining amount you can create different financial goals and prioritise them and start saving for them.

2. As a couple
The stage changes when you get married and now here you have a dependent. However, if your spouse is working then there is no or low dependency. However, here your personal finances do change. At first, there is a possibility of change in financial goals as before marriage all goals might be considering you as an individual, but after marriage you start to have goals as a couple. Even the requirement of the emergency fund might change, even there is change in the expenses. Also, you need to update the nomination and in case of any changes in name on all the important documents and investments. So, at this point of time you have to revisit your financial plan and account for all the changes to have a proper direction.

3. Child’s birth
This is one of the most emotional moment for any parent as they experience the new member in the family. However, when it comes to personal finance things do change. With inclusion of new member in the family again you need to re-look at your financial goals and emergency corpus and not just that you also need to get a family floater of till now you were having individual policies as a couple. This further increases financial responsibilities not just in terms of his/her education and marriage but also other general expenses. So, revisiting and updating your financial plan in such a case is very important as it will account for all the changes happening in your life.

4. Pre-retirement
This is the life stage which falls between your first job and retirement. Here you may have achieved a lot with respect to your job and also are on your way to complete all your responsibilities with respect your child's education and marriage. Here also your personal finances changes. The major expenses such as child’s education and marriage tend to end and you progress towards your retirement. This is very important phase as here you would also need to plan for your retirement to avoid any issues pertaining to personal finance in retirement.

5. Retirement
Usually in retirement (assuming no early retirement), most of the responsibilities are completed and also you would have been debt-free with very nominal loan amount outstanding if any. Now in this life stage again your financial goals and priorities changes. So, it is prudent to seek help of an expert financial planner or retirement planner who would help you to make your retirement journey peaceful as far as personal finance is concerned. This to provided that you had started planning for retirement in your accumulation phase i.e. before your retirement itself.