Life stage financial planning

Why you need to know Lifestage Investment Strategies

When you are young you can eat whatever and get away with it. But as you age you realise the response of your body to what you eat.  You reduce your food quantity, you cut down fried items, you avoid spicy food, and you refrain from heavy to digest food. When you become old you further cut down many foods.

As you age your priorities also change. Your risk appetite changes. Your ability to manage multiple things change. What you want are peace and good health.

“You know you’re getting old when the candles cost more than the cake.” Bob Hope

Every life stage brings many changes, investing and money management also changes at every stage of life.

Here we present 5 life stages and how money and investing change at every stage.

  1. Young Graduate

You started to earn your first income. You can do whatever you want. But remember your investment should start with your first salary/income. It may be a small amount but habit matters.

Early you start earlier your money will start working for you.

You can experiment with the stock exchange shares investing. You can take a risk with your money. But remember schemes with are inherently scams is not a risk, it’s fooling you. Avoid investing in scam schemes.

You can do three smart things at this age. Invest in your life insurance; it will be cheaper at a young age. Buy a health insurance policy. Invest in regular investment schemes.

Ideally, you can invest 70-80% in equity in this age. If you do it right, it can make you wealthy in a few years.

Remaining money can be invested in life insurance and less risky investments like bond funds, mixed funds.

  1. Married Couple

This is perhaps the interesting phase.  When both spouses are working, you income doubles. But you also have to look out for and plan for your home or a larger home for the family.

You have your own dreams of roaming the world. You may need to borrow to buy your home and car. Borrow but do it cautiously. Don’t make it a habit.

“Every time you borrow money, you’re robbing your future self.” Nathan W. Morris

Be a regular investor. You have to build your wealth. Take some risk. Invest 60-75% of your money in equity-linked schemes. Rest of the investments can be made in life insurance, bonds, fixed deposits, gold, and tax saving schemes.

  1. Middle Age

Here your responsibilities are the highest. Your parents are dependent on you. Your children are aspiring for higher education, their wedding organised are years away. You need to think of your retirement corpus.

At this age make sure your life insurance and health insurance are adequate to match your lifestyle.

Keep your equity exposure reasonable and plan for future responsibilities. Divide money equally between equity-linked exposure and less risky and no risk instruments. Divide money for the long-term and medium term. Ensure ease of liquidity to take care of your responsibilities.

Real estate could be a good investment. But keep in mind entry and exit cost, maintenance cost, and the ease of liquidity aspect.

  1. Near Retirement

Do not take a risk with your fund. You can’t afford to lose money at this age.

Check out your fund selection in ULIP and mutual Funds schemes. Move from equity to more stable funds.

Keep all your scattered investment organised. Exit risky investments. Check the adequacy of your monthly income scheme investment. Make the portfolio lean and manageable.

Get ready for your retirement. You need no hassles and no risk. Plan to enjoy your golden years of life with your hard earned money working for you.

  1. Retired

You have retirement superannuation money with you. Be cautious. Do not be greedy or act in temptation. This money should take care of you till you die. Be cautious with the money.

In this stage, money should earn for you. Most of the life insurance policies have matured.  Lifespan has increased. Healthcare cost is rising. You can afford to take a risk since you can’t earn.

In this phase, all your years of efforts and investments work for you. Keep your investment in safe instruments. Do not invest in the long-term instruments.

You can see monetary priorities, risk appetite, liquidity requirement

“Life is in different stages.  Every stage of life is the foundation for the next stage of life. Every stage of life must be fully-lived.”  Lailah Gifty Akita.

This is how your need for money changes during different stages of life. Play by the age and remain money savvy.

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