Carnegie Investment Counsel Blog

The 3 Financial Phases of Life: Tips to Help You Prepare

Posted by Carnegie Investment Counsel on Aug 5, 2021 1:30:00 PM

Three Stages of Life Blog

As we progress through life, we arrive at various well-defined markers along the way, termed as life events or major milestones. These events might include earning a college education, entering the workforce, marrying, raising a family, advancing in your career and retiring. There are obviously many others you might experience during your life’s journey.

In this article, we address the financial stages of life. We look to define those phases and help you properly prepare for each stage. Goal setting is a key component of this process. Better preparation today will lead to a more beneficial outcome once you reach your retirement years.


1. Financial Establishment Phase

This initial stage typically includes post-secondary education or workforce training, finding gainful employment and meeting your life partner. Additionally, family formation and development are important markers for many of us in this phase. 

Some financial goals to consider during this phase:

  • Develop sensible financial habits
  • Effectively manage cash flow by reducing debt and building savings
  • Consider life and disability insurance options
  • Build and maintain a solid credit history
  • Create an education fund for your children and make regular contributions
  • Contribute to an employer-sponsored 401(k) to the maximum amount possible
  • Purchase or save for a residence


2. Mid-Career / Pre-Retirement Financial Phase of Life

While family and work responsibilities may continue to grow during the middle-age years, one constant should be prudent money management. Put simply, spend less than you earn and devote the difference to savings. During this stage, your focus should gradually shift toward retirement planning and funding. You will allot an increasing portion of your financial resources toward longer-term goals. 

This can be an appropriate time to engage a financial professional to assist you in mapping out your financial future. This professional can help you understand and properly assess the level of risk you are taking on and how best to protect your family from undue risk. They will help you stay on track with a well-devised plan that ensures that your goals are realistic and attainable.

Some specific goals to consider during this phase:

  • Create an estate plan that includes a last will and testament, a healthcare power of attorney and a financial power of attorney
  • Make the best use of tax-advantaged savings accounts by making the maximum contributions allowable
  • Consider after-tax investment vehicles like a Roth IRA
  • Weigh the possibility of paying down your home mortgage
  • Revisit your life insurance coverage to ensure your family is properly protected 
  • Periodically evaluate progress toward the broader goal of financial well-being and adjust as needed
  • Think about starting your own business, looking to supplement your income while providing a means to stay productive in retirement


3. Retirement Financial Phase of Life

As you exit the working world, there should be a sense of satisfaction that you have reached some of life's goals, financial or otherwise. But for many, retirement is just another stage in the process, certainly not a crossing of the finish line. As life expectancy in the U.S. has extended significantly over recent decades according to research from the US Census Bureau, retirement has a different look and feel for many of us.

Properly planning at an earlier age may make it more likely that you will flourish in your golden years. Even then, from a financial standpoint, there are steps to think over once you have reached that magic retirement age.

Some items that you might think about:

  • Taking a more gradual departure from the workforce or part-time employment, if you have the motivation and enjoy your job
  • Fostering an active lifestyle that will keep you and your partner healthier
  • Finding (or expanding) hobbies or seeking other ways to fulfill non-financial goals

Remember that financial planning does not come to an abrupt end with retirement. There are still goals to be met. In broad terms, you will convert retirement savings to income from two different types of sources: 

  1. Most people can expect some income from outside sources in the form of Social Security, a pension or an annuity. This income tends to be a fixed amount received every month. It is important to maximize Social Security income and seek strategies to minimize taxes.
  2. There are also variable sources of income that are derived from the assets you have accumulated over your lifetime. Typically, this would include investment accounts, employer-sponsored accounts and IRAs, in addition to any other savings accounts. These are considered variable because you will need to manage the amount of funds withdrawn in any given month.

In the later years of retirement, there are other considerations: long-term care insurance, updating an estate plan and ensuring that your wealth distribution strategies will make your assets last.


Managing the Financial Phases of Life Conclusion

No matter where you find yourself in this process, at a minimum, you should put your goals in writing. This will remind you of the steps to financial well-being that you have selected. 

Building financial security is a lifetime process and is best approached with the assistance of a trained professional. In order to get the most out of your particular situation, consult with a financial advisor who can help you implement a series of financial goals.


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If you are currently looking for help with financial planning, contact us. We are happy to schedule an introductory meeting at your convenience.

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Topics: Financial Planning, Retirement Planning

Carnegie Investment Counsel

Written by Carnegie Investment Counsel

Carnegie Investment Counsel is an Registered Investment Adviser (RIA) providing personalized financial guidance to help you preserve and grow your wealth, so you are freer to enjoy your life. As your fiduciary, we are obligated to place your investing success ahead of our returns.

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