Lesson 1 - Financial Planning - Part 5

Planning and Goals

One of the most important aspects of financial success is planning.  Without Planning we have no direction, we have no way of knowing where we’ve been or where we are going.  Imagine being on a boat in a lake floating around aimlessly, eventually you will run aground into financial disaster.  But planning requires us to start early on in life to maximize our potential future.  Waking up at 50 years old and deciding to start planning for retirement will be much more difficult than starting when your 20.

Life-Cycle Planning

As we go thought life we will enter into one of 5 different life-cycle groups.

Life-Cycles	Financial Planning
Young Adults - (18-25)	Consumption, Savings, Debt
Family Formation - (26-35)	Debt, Insurance
Family Development - (36-49)	Insurance, Investment, Retirement
Family Maturity - (50-60)	Investment, Retirement, Estate
Retirement - (60+)	Estate, Income

The purpose is to show you that your Goals might change at different points in your life.  That being said, the sooner we identify a Goal the sooner we can properly plan for those Goals to become reality.  Retirement, children, or a trip around the world are all goals that can be accomplished with proper planning.  However, it is important to note that not everything in our lives can be anticipated.  As the chart above shows that as life goes on our Goals will change over time and we might even add new Goals or erase past ones.  It is important that as soon as a Goal is set that we begin to plan for the success of that Goal.

In each of our life-cycles we must monitor each of the Financial Planning Goals for changes.  Taxes again will play an important role in how we plan for anyone’s future.  To give you an example of the importance Taxes play in our world, take two families who earn exactly the same amount of income.  Both families pay Taxes, but these two families could end up with hundreds of thousands of dollars in saved money over a course of 30 years due to an effective or ineffective Tax Plan.  We will talk in more detail about Taxes at a later time.