Certain events in life make you realize that your personal and financial lives are inseparable. The simplest strategy to balance your personal life and finances is to start planning early in life. No matter what stage of life you are in, you need to save and invest regularly. Financial decisions must reflect not only our financial goals, but also our values.
At Alvini & Associates, P.A., we factor in our clients life cycle phase, also called time horizon, as well as their goals, when making financial plans. It is our role to make sure you are aware of the different services needed at each stage in your lifecycle.
Whether you are fresh out of school, newly married, starting a family, recently divorced or widowed, or retiring, your financial needs keep changing. These are called “life events,” and each new life event brings upon new challenges and opportunities. Major life events should be examined from a financial perspective.
As people go through different phases of their lives, their goals change in importance and priority. Sometimes these changes are the cause of unexpected events, but most of these changes follow a general financial life cycle pattern.
Consists of Young Adults (18-25), Family Formation (26-35) and Family Development (36-45) sub-stages. Involves a long period that centers on the accumulation of wealth. Goal setting, insurance, home buying, children’s education, emergency funds, and saving for retirement are highlighted in terms of planning.
Consists of Family Maturity (45-60) sub-stage. Involves a shorter period approaching retirement. Financial goals shift to the preservation and continued growth of the wealth already accumulated.
Consists of the Retirement (60+) sub-stage. Involves more spending and less saving. Safety, income, tax reduction, protection from inflation, and estate planning take on increased importance.
Where you are in the life cycle may affect how you construct your portfolio. Someone in the early years stage or young adulthood may be willing to take on more risk than someone in the Golden Years stage or Retirement Years. As stated previously, time horizon and risk tolerance are some of the main factors when determining suitability.
You just received the wonderful news that you and your spouse are going to become parents. Thoughts of the many adventures parenting will bring are swirling through your head. The last thing on your mind may be paying for college, but thinking about it now may save you later. The cost of a four-year degree at a private college can easily exceed $140,000 (Source: Trends in College Pricing-2009, The College Board).
However, even if you are aware of the importance of saving for an education, you may be unsure of available options. The following is an exploration of the most common college savings vehicles:
The last option you might consider when saving for your child’s future education may be a simple bank savings account. Although bank savings accounts may offer immediate liquidity and versatility, there are no tax advantages, and given their low risk, the earning potential is very low. Therefore, when it comes to saving for education, it may not be the most beneficial choice.
So, if you are wondering whether you should begin saving for your child’s education now, the answer is, yes. Regardless of which option you choose, beginning today to save for a child’s education will help ensure your child a more secure tomorrow.
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