Kyle Swaim
TB Group LLC
It would be nice if, when a new client comes in, I could go to a file cabinet, pull out a plan, and hand it to him or her. But that’s not how life should work. First, I need to understand the client’s situation, values, obligations, and —above all — goals. Then the client and I need to determine what life phase the client is in.
Your financial life will most likely proceed through phases, each of which can last a decade or more. I call them the Four Fs: fundamentals, flourishing, freedom, fulfillment. Here’s a brief description of each phase. The number in parentheses is the age that most people have that phase, but that’s a very rough guess. There’s nothing necessarily wrong if you find yourself off by a decade or two. It’s your life, after all.
Phase I: Fundamentals (20s)
In the fundamentals phase, you are trying to set yourself up for success in the future. You are probably making your first household budget. You are making sure you have enough cash to survive for three months and that you have enough insurance (home, auto, life) for your family to weather catastrophe.
In this phase, you’re likely to be more focused on your work than your future. You’re trying to establish a career and perhaps a family. Things like investing and retirement planning take a back seat. One of the distinctive aspects of this phase is that many people go through it several times, because an unexpected life event (divorce, bankruptcy, job loss) can throw you back into it.
Phase 2: Flourishing (30s & 40s)
Having survived the Fundamentals phase, you move into the Flourishing phase. You have some stability, and you can afford to think about the future. You’re probably setting up college funds for your kids or seeking investment opportunities beyond a simple savings account. In this phase, you’re working up to the peak of your ability to save and build assets. This phase usually marks the beginning of your planning for retirement and taxes, as well as a more sophisticated approach to your insurance.
This is the phase in which you can afford to think about your life goals. It’s not just goals that are important here, however. You need to think about your values as well because your values influence your investment choices. Believe me, you don’t want to enter the later phases of your life with a fortune made from something you consider morally repugnant. That requires too much energy just to look in the mirror every day.
Phase 3: Freedom (50s & 60s)
Many people find this to be the most exciting phase. You probably have enough assets to think seriously about protecting them. How can you make sure you hold on to what you’ve got and to convey it to the next generation with a minimal tax burden? You need to think how you will draw down on your net worth during the next phase, which coincides with retirement.
The hallmarks of this phase are retirement income planning and estate planning, as well as focus on family, community, and legacy.
Phase 4: Fulfillment (70s)
Most people are retired when they enter this phase. If you’ve managed the previous phases well, you are probably comfortable. You have more time to do things that seriously enrich your life, such as travel, education, volunteering, even philanthropy. You will be reflecting somewhat on the earlier phases, and your previous focus on your personal values will pay off in the form of satisfaction and healthy sleep at night.
I am not trying to tell you how to live your life. Depending on your circumstances, you may not even progress through the phases in this order. But when you work with your financial planner, it will be important for you to both know what phase you’re in. That will suggest current priorities, long-term goals, and aspirations. At TB Group, we believe your financial plan is an expression of who you are and who you want to be. Click here to set up your consultation with us.
Photo: “Person Standing on Hand Rails With Arms Wide Open Facing the Mountains and Clouds” by Nina Uhlikova via Pexels