You Need to Know What “financial Phase” You Are In

You’ve likely experienced monthly or yearly fluctuations in your budget and spending (or weekly; hey, inflation ). Sometimes it may seem that you are just clinging to life. But if you’re thinking about your financial well-being in the long term and in general, there’s a general structure to help you earn, save, and spend in line with your goals.

So what are the stages of financial planning and why do you need to understand them?

Three stages of personal finance

The three phases of personal finance are wealth accumulation, wealth preservation, and wealth distribution.

Phase 1: Creation/accumulation

During the accumulation phase, you focus on building and growing. Here you earn, save and plan for the future. It is important to think ahead and often about your long-term financial goals and develop a savings plan accordingly. For example, do you want to buy a house? Save for your children’s education? Retire early? Do you travel often?

“I encourage clients to think in terms of financial or life goals, be clear about what you want to achieve, come up with a realistic plan, and execute it,” says Andrea Brashears-Lusk, Certified Financial Planner and President of Maryland. and founder of Wise Financial Counsel .

At this stage, you are also setting yourself up for success in protecting your assets and everyone who depends on them, whether it be estate planning or buying life and disability insurance.

“If I’m in the accumulation phase, my human capital is very important,” says Michelle Petrovski, a certified financial planner from Arizona and founder of Being Abundant . “For those who are younger, you want to make sure you have the appropriate risk management in place.”

Stage 2: Transition/Save

The second stage involves some additional assessment of your values, goals, and the financial planning work you have already done. You will start thinking a lot more about planning for retirement and what you will need when you are no longer working. You will also want to consider your investment strategy, your current and desired level of risk, and any possible changes to your holdings (such as upgrading or downsizing your home).

Phase 3: Distribution/Deployment

The final stage of financial planning will most likely occur after retirement, when you will no longer receive a salary. You take out your savings when you distribute and deploy, which means you need to consider tax implications when you do so. You can also focus on your legacy, whether it’s financial donations to organizations you care about or leaving something for your children and grandchildren.

Why Your Personal Finance Phase Matters (Sort of)

Knowing where you are at can help you plan and prioritize your income, savings, investments, and expenses. However, while these three steps offer one way to structure your financial planning, it is important to note that they are not necessarily discrete.

For example, retirement can be “rather a gradual transition,” Petrowski says. Some people may leave the corporate world at retirement age and start their own business. Dismissing or blending a family can bring someone back to saving from moving to saving.

Likewise, Brashers-Lusk believes that safekeeping is critical throughout your financial life to protect your assets, even as you are still accumulating and growing and preparing to transfer wealth.

“I think conservation is actually part of every stage, but at the end you think about how to continue your legacy and make your money outlive you,” says Brashears-Lusk.

How to know what financial stage you are in

The three stages of financial planning may be loosely related to age and stage, but it’s important to note that many additional factors, including values, goals, and important life events, also affect your position.

“You can tell where you are based on your goals and life events,” says Brashears-Lusk. “It doesn’t necessarily depend on age, but there is a strong link.”

Your existing financial base, including generational wealth, can also change how you progress through the stages. “When you have access to various financial resources from the very beginning, it gives you an advantage over those who build from scratch or start from scratch,” she says.

Petrovski says he asks clients to clarify their values ​​to communicate their goals and plans. It can also help you understand what stage you are in. For example, cherishing family might mean having children or traveling with siblings every year. Or your values ​​may shift from career success and spending to peace of mind and savings after being fired.

“It goes back to values ​​and what matters to them,” she says. “It’s not one and it’s not done.”


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