Exploring the Financial Stages of Life

Exploring the Financial Stages of Life

December 07, 2023

When I joined Canby Financial Advisors in 2000, the financial advisory business focused mainly on investments.

At Canby Financial, we wanted to do more than simply manage our clients’ money. We wanted to get to know our clients. To find out where they were in life. To uncover the financial challenges that sometimes kept them up at night. To understand their vision of what they’d like their retirement to be. Their dreams for their children. And what kinds of legacies they’d like to leave behind.

That’s why from the very start Canby Financial has always positioned itself as a team of financial planners who also manage money for our clients.

Just about every relationship begins with developing a comprehensive financial plan that encompasses each client’s financial objectives and challenges.  Managing current cash flow, deciding how much to put away for retirement versus a college education, purchasing a new home and creating a legacy to leave to future generations or their favorite charities are all important financial decisions.

In our preferred process, we don’t begin to manage a client’s investments until we’ve drafted a financial plan, which outlines specific actions the client may want to take to better organize their financial life, including investment allocation strategies.

While the financial plan provides a blueprint, it’s also a living document. It needs to be updated when career or life events, planned or unexpected, alter our client’s financial realities.  As we progress through the various stages of life, we can develop the knowledge, values and habits that help lead us to financial security.


The Financial Stages of Life


 


You may have seen this illustration of the Financial Stages of Life in our marketing materials or on our website. It’s also embedded in our logo.

And while we often discuss these stages at a very high level, we’d like to provide a deeper explanation of the financial challenges and opportunities people experience during the Foundation, Accumulation and Realization stages. So, let’s explore them in greater detail.


Foundation Stage – birth to 30 years old


In the first stage of life, we don’t have many financial responsibilities, but we do start to build a foundation of knowledge and values that will guide us in the future.  We develop the skills—reading, writing, and math—that will help us as we begin to make our own financial decisions.

We start to learn the value of money from our parents. We have some input on basic budget decisions – for example, how buying a new toy may impact whether our family goes out for ice cream.  Supporting a local charity could mean one less birthday present.  Saving a portion of our allowance for doing household chores may allow us to build up enough money to buy a new bicycle.

The second stage of life typically begins in high school.  Parents still play an important role, but we decide what academic classes we want to take and which sports or extracurricular activities we enjoy. Around this time, we gain control over our own bank accounts.   

As we approach graduation from high school, we start thinking about which colleges we might attend, the costs of higher education and how much of our own money we may need to help pay for some of these expenses.

When we’re in college, we get our first taste of independence. We start thinking about life after college, away from our parents and siblings, which can be scary. We start to consider career options and where we want to live. 

Long-term financial security is easier to achieve with a partner. By forming a bond and team with another individual, we have a soulmate with whom we can share life’s ups and downs.  This person should share the same life goals and together we’re more likely to stay focused on achieving long-term prosperity.

Accumulation Stage – 31 to 60 years old


In the next stage of life, we begin to settle down.  We choose a career that is both mentally and financially rewarding. We may have started to save for retirement in our twenties, but we get a better appreciation of the importance of building a long-term nest egg, usually by contributing to a tax-advantaged retirement plan.  

If we decide to have children, our financial life begins to grow in complexity as many different goals compete for a share of our income. We’d like to own our own home sooner rather than later. We want to save money to help pay for our children’s college costs, even while we’re still paying off our own student loans. We want to safeguard our family’s financial security, which may mean purchasing our first life and homeowner’s insurance policies.

The second half of the Accumulation stage of life gives us a chance to set priorities and judge our likely success in reaching our financial goals.  If our careers are going well, we should be reaching our peak earning years. Making prudent decisions with our discretionary cash flow will have a big impact on our retirement years.

We may also find ourselves sandwiched between our growing children and our elderly parents. Besides the exorbitant costs of both higher education and assisted living, the complexity and time required to manage three generations can be overwhelming. 


Realization stage – 61 years old and beyond

As our hair starts to thin and/or turns grey, thoughts of retirement become front and center.  There are many variables to consider. Can we control when and where we retire?  What happens if health and workplace changes force us to retire sooner than we expected?  When should we start taking Social Security and transition to Medicare?  Will our nest egg be sufficient to provide the income needed to meet our retirement dreams or do we need to compromise on certain goals?

Finally, retirement comes. 

We’ve spent decades earning and investing money to help achieve our financial objectives, and now is the time to start enjoying the fruits of our labors. 

Do we have a “bucket list”?  Once situated in retirement, we can start to check off some of these items. We can also ensure that we leave a legacy to make the world a better place for our families, friends, and communities.  If we are fortunate enough to live into our 80s and 90s, our lifetime of experiences is a treasure chest to share with younger generations. Hopefully, the example we have set by living our lives in a financially responsible manner can be passed on to future generations.

Planning for life

At Canby Financial Advisors, we meet people at different stages of their lives, usually when they are looking for guidance to help them address specific financial challenges and opportunities.

A financial plan addresses current issues but can also help our clients consider how their resources and knowledge can help their children and parents achieve positive outcomes.

And that’s what makes our jobs as financial planners most rewarding: earning our clients' trust as we help them build their wealth through the various stages of their lives. 




This article was authored by Christopher Borden and Jeffrey Briskin. Chris is a financial advisor and Managing Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or cborden@canbyfinancial.com   Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.

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