Financial planning is a multifaceted process that involves everything from budgeting, saving and investing to mitigating taxes, preparing for retirement, and settling your estate.
A comprehensive financial plan is not static—it evolves with changes in your life situation, needs, and goals.
Here’s a look at the ins and outs of financial planning, including how financial priorities and strategies can shift at different phases of the life cycle.
What are the Different Types of Financial Planning?
Financial planning involves evaluating your current circumstances, determining your goals, and implementing strategies to meet them.
It encompasses every aspect of your financial life, including accumulating and protecting your wealth, while preparing for potential costs and challenges along the way.
Here are the different facets of a well-executed financial plan:
Budgeting: Managing your income and expenses to align with your priorities and goals—and avoiding unnecessary debt.
Tax planning: Implementing strategies to help minimize your tax liability and maximize tax refunds.
Education planning: Estimating expenses for your child’s future education and contributing to a 529 plan or other tax-advantaged accounts in preparation.
Insurance planning: Evaluating your risk and investing in insurance policies to protect your family, assets, home, business, and yourself from unexpected financial burdens.
Investment planning: Assessing your risk tolerance, establishing timely goals, selecting investment types and asset classes, and adjusting your strategy as needed.
Retirement planning: Creating a strategy for long-term savings, investing, and income to achieve your ideal lifestyle in retirement.
Estate planning: Outlining your intentions for the management and distribution of your assets if you die or become incapacitated—via wills, trusts, powers of attorney, and other legal documents.
Philanthropic planning: Developing a plan for charitable giving that aligns with your goals for your legacy while employing strategies to reduce income and estate taxes.
What is the Life Cycle of Planning?
The financial planning life cycle refers to unique needs, challenges, and solutions corresponding to different stages, starting in young adulthood and ending in retirement. For example, a 25-year-old’s financial focus (and strategies) will be vastly different from those of a 55-year-old.
Here’s a brief summary of these different stages:
Early Adulthood
In their early 20s, young adults may be graduating college and entering the workforce. Typically, the focus is on learning how to budget and manage money effectively, paying off student loans or other debt, and building an emergency fund.
Starting a Family
By their 30s, many adults may be preparing to get married, have children, and advance in their careers. At this point, financial goals typically shift towards saving and investing for major purchases (such as a home), future tuition expenses, and retirement.
Accumulation Years
People in their 40s tend to be in their peak earning years, which can provide more financial resources to commit to building wealth, maximizing retirement contributions, and taking on a more aggressive investment strategy.
Pre-Retirement
For those in their 50s, priorities generally shift to choosing the right age to exit the workforce, deciding when to take Social Security benefits, embracing a more conservative asset allocation, and planning for income and long-term care needs in retirement.
Retirement
According to a recent study, the average retirement age for Americans is 62.1. Accordingly, at this stage, people tend to focus on taking retirement distributions in a tax-efficient manner, preserving and passing their wealth on to their loved ones, and leaving a charitable legacy.
Enjoy the Journey
You’ve worked hard to build wealth. Now, it’s time to achieve peace of mind by having a comprehensive financial plan in place to protect it for future generations.
Crescent Harbor can help by providing objective advice, tailored planning, and comprehensive wealth services to ease stress and allow you to focus on what matters most.
Sources
1 https://money.usnews.com/money/retirement/aging/articles/what-is-the-average-retirement-age
This material is for informational purposes only and should not be construed as tax or legal advice.
Registered Representatives of Sanctuary Securities Inc. and Investment Advisor Representatives of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Crescent Harbor Private Wealth is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.