Financial planning is more than just a series of savings and investments you lock away and forget about because your money doesn’t exist in a vacuum.
Your financial needs are going to fluctuate in response to the transitions that we all go through as we work, raise our families, and look ahead to retirement. Managing these transitions is one of the keys to maximizing your finances and to achieving a greater life.
Knowing Your Life Stage
Erik Erikson, psychologist and psychoanalyst, is known for his theories on the psychological development of human beings. According to his theories, an individual typically passes through eight stages during their life. It is typically based on age, but age doesn’t always dictate moving from one stage to another. Being familiar with your current life stage can provide focus and allow you to feel you’re on the right track as you transition from one stage to the next.
Recognizing a Transition
A life transition can be big, small, planned, or unplanned. The common denominator is that it impacts your life in a significant way. Here are several transitions to help you recognize when one happens to you.
- Concerns about health for a child, spouse, or aging parent
- Assistance to a family member (often as a caregiver)
- Diagnosis of a chronic condition (e.g. diabetes, Alzheimer’s)
- Death of a family member
Work / Retirement
- Job / career change or starting a new business
- Downshift to part-time work or full retirement
- Start receiving Social Security income or reach Medicare age
- Move to a new home
- Change in investment philosophy
- Significant investment gain or loss (e.g. inheritance)
Changing Transitions Over Time
As trusted advisors, we can plot your anticipated life transitions and start discussing the transitions that are most important to you. Maybe you need to understand the financial implications of taking care of an aging parent. Perhaps it’s figuring out how to pay for your kids’ education. You may want to know the best time to start receiving pension payments. Over time, as new transitions arise and old ones get completed, we can add, remove, and reprioritize transitions as necessary.
The easiest way to throw off your financial plan is to make a rash, emotional decision in the middle of a difficult moment. Avoid reacting – or overreacting – to the ebbs and flows of your life by having a proactive mindset about your financial future.
By building and protecting your wealth with the right type of planning for your stage of life, you’ll no longer experience anxiety about unexpected expenses, feel stress or confusion about your investments, fear being taken advantage of, or worry about running out of money. You’ll be financially and emotionally able to take on life’s big transitions and live life on your terms.