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Adam Vega, CFP® profile image Adam Vega, CFP®

How to Plan Financially in Each Phase of Your Life

This article aims to be a guide, providing insights and actionable advice tailored to each significant life stage.

How to Plan Financially in Each Phase of Your Life
An elderly couple sitting together at a table, working on a stack of documents.

Financial planning is not a one-size-fits-all process; it's an evolving discipline that should accompany us throughout our lives. As we transition through various stages, our priorities, needs, and financial goals change, necessitating a shift in our strategies and focus. Proper planning at each juncture ensures we're not only prepared for current obligations but also well-equipped for the future. Whether you're just starting to grasp the concept of pocket money or navigating the intricate intricacies of retirement, understanding the nuances of each life phase can offer clarity and control over your financial trajectory. This article aims to be a guide, providing insights and actionable advice tailored to each significant life stage.

An endearing scene of an elderly man and a young child cooking together.

Childhood & Adolescence

Introduction to Savings:

Value of Pocket Money: From the first allowance to babysitting wages, early earnings teach the foundational principle of saving. Encouraging a savings habit at this stage can establish a long-lasting financial responsibility and discipline (Merrill Edge).

Opening a Bank Account: This is often a young person's first interaction with formal financial institutions. It's more than just a place to store money—it's a learning experience about interest, banking processes, and the value of money.

Education & Planning Ahead:

  1. Importance of Budgeting: Adolescence is an excellent time to introduce the concept of budgeting. Allocating funds for specific purposes—be it for a new game, a school trip, or a gift—helps instill the practice of managing and prioritizing expenses.
  2. Financial Education: Schools today are increasingly recognizing the importance of financial education. From understanding debt to getting a grasp on how credit cards work, this knowledge equips young adults with the tools they need for the real world.

In these formative years, the groundwork is laid. By emphasizing the basics of saving, investing, and budgeting, we can set the stage for a financially secure future. It's about planting the seeds of financial literacy early, ensuring that as these young individuals grow, so does their understanding of and competence in managing money.

A young woman engrossed in her work on a laptop.

Young Adulthood (20s & 30s):

Launching Independence:

Post-Education Debt Management: For many, entering young adulthood comes with student loan repayments. It's essential to understand your repayment plan, interest rates, and any available relief programs or refinancing options. Timely repayments not only reduce the financial burden but also positively impact your credit score (Consumer Financial Protection Bureau).

Starting a Career: The excitement of a first job and a steady paycheck can sometimes overshadow the importance of budgeting and saving. Adopting a disciplined approach to expenses and understanding the value of a paycheck can lead to more informed spending choices.

Major Milestones and Investments:


Initial Costs: Purchasing a home is more than just the listed price. There are down payments, closing costs, and potential renovations to consider. It’s important to be financially prepared for these initial costs to prevent future stress.

Understanding Mortgages: Not all mortgage plans are created equal. Knowing the difference between fixed-rate and adjustable-rate mortgages, for instance, can affect your long-term financial outlook. Fixed-rate mortgages “have an interest rate that remains the same”, while adjustable-rate mortgages have interest rates that may change “based on broader market trends” (Investopedia).

The Value of Location: Investing in areas with growth potential can yield significant returns in the future. Researching market trends and understanding local amenities can guide better purchasing decisions.

A heartwarming scene of a family enjoying a meal together.

Marriage and Family Planning:

Financial Aligning: Merging two financial lives requires understanding each other's debts, assets, and financial goals. Consider consulting a financial advisor to plan collaboratively.

Budgeting for the Future: New family members or even planning for them can have significant financial implications. Modifying your budget to accommodate childcare, education, and other related costs is crucial.

Insurance Needs: With dependents, it becomes essential to reassess life insurance needs, ensuring that loved ones are protected financially should unforeseen events occur.

Retirement Planning – It's Never Too Early:

Introduction to Retirement Accounts:

The Power of Compound Interest: Starting your retirement contributions in your 20s, even if they are minimal, can yield substantial returns over time. In fact, if you start early, “you can afford to put away less money per month” because of compound interest (Investopedia). The earlier you start, the more you benefit from compound interest, where the interest you earn begins to earn its interest.

Roth vs. Traditional IRA: Each has its benefits and implications. While a Roth IRA allows for tax-free withdrawals in retirement, a Traditional IRA offers tax deductions on contributions now. Your current and projected future income levels will guide which option is optimal for you.

Understanding Employer Benefits:

Maximizing Matching: If your employer matches 401(k) contributions up to a certain percentage, strive to contribute at least that much. Not doing so essentially leaves free money on the table.

Exploring Other Perks: Some employers may offer financial wellness programs, stock options, or education reimbursement. Familiarize yourself with these benefits, ensuring you’re optimizing your financial growth opportunities.

A man working intently on his laptop.

Midlife (40s & 50s):

Consolidating Financial Strength:


Asset & Liability Analysis: Midlife often brings about a shift in financial dynamics. Reviewing and updating your financial portfolio becomes pivotal. Assess the growth of your assets against your liabilities to gauge your financial health. This is also known as your net worth (Federal Deposit Insurance Corporation).

Financial Advisor Check-in: It’s beneficial to periodically consult with a financial advisor during these years. They can provide insights on optimizing your portfolio, potential investment opportunities, and ensuring you're on track for retirement.

Debt Management:

Strategizing Repayments: This period is an optimal time to focus on reducing major debts. Whether it's the remainder of a mortgage, car loans, or lingering student loans, devising a plan for accelerated repayment can free up future finances.

Avoiding New High-interest Debts: As children go to college or as you consider upgrades to your home, it's essential to avoid accumulating new high-interest debts. Consider options that allow for manageable repayment terms or low-interest rates.

Investment Diversification:

Balancing Risks: Midlife is a juncture where both aggressive and conservative investments can coexist in your portfolio. The aim is to maintain growth while ensuring a degree of security.

A female figure walking towards a two-story house.

Exploring Real Estate: If you haven’t already, now might be an opportune time to explore real estate investments. Whether it's rental properties or real estate funds, diversifying in this sector can offer steady returns.

Global Investments: Broadening your horizons can be beneficial. Consider global mutual funds or stocks, keeping an eye on emerging markets that promise growth.

Retirement Focus:

Boosting Contributions: As retirement nears, maximizing your contributions to retirement accounts ensures you're making the most of tax advantages and employer matches.

Projected Expense Analysis: Anticipate future retirement expenses. Factor in potential needs for “health insurance, medical services, medical supplies”, leisure activities, and any pending loans or debts (SoFi). This will help in understanding how much you truly need for a comfortable retirement.

Exploring Additional Streams: Beyond traditional retirement accounts, it might be beneficial to explore other income streams like annuities or passive investment income to fortify your post-retirement finances.

Estate Planning Revisited:

Updated Will: As dynamics change, ensuring that your will is current is paramount. Whether it’s the addition of grandchildren, the sale of assets, or shifts in relationship structures, an updated will reflects your latest intentions.

Considering Trusts: Trusts can be an effective tool in estate management, offering benefits in tax planning, asset protection, and specifying terms of inheritance.

A young man deeply engrossed in his work.

Approaching Retirement (60s and Beyond):

Retirement Account Withdrawal Strategy:

  • Tax Implications: As you start withdrawing from your retirement accounts, understanding the tax implications becomes crucial. For instance, withdrawals from a Roth IRA will differ tax-wise from a 401(k). Planning these withdrawals strategically can optimize the after-tax income during retirement.
  • Mandatory Distributions: Some accounts, like traditional 401(k)s, mandate required minimum distributions (RMDs) once you reach a certain age. Being aware of these can prevent potential penalties.

Social Security Benefits:

Healthcare and Long-Term Care:

As the golden years dawn, the importance of healthcare planning comes to the fore. With advancements in medical technology, we're living longer. However, this extended lifespan comes with its set of challenges, particularly when it concerns healthcare and long-term care costs.

A young lady and an older woman, seated across from each other at a table, having a discussion.

Long-Term Care Planning:

The Reality: While many wish for their retirements to be free of health complications, statistics show that a significant percentage of seniors will require some form of long-term care. This could range from assisted living facilities to at-home care.

Insurance Options: Long-term care insurance can help cover the cost of care when you can't perform everyday activities due to a chronic illness, disability, or cognitive impairment like Alzheimer's. However, premiums can be high, so it's vital to evaluate if it's the right choice for your situation.

Alternative Funding: Not everyone opts for long-term care insurance. Other methods to fund this care include personal savings, reverse mortgages, or annuities with long-term care riders. Assess your financial landscape to determine the most appropriate approach for you.

Staying Proactive:

Annual Check-ups: Regular health check-ups can't be stressed enough. They can catch potential issues early, leading to more manageable treatments and better health outcomes. An ounce of prevention is worth a pound of cure. After age 50, you may want to prioritize getting atleast one check up per year (Morada Senior Living).

Lifestyle Choices: Nutrition, exercise, and mental well-being play significant roles in health outcomes. Engage in regular physical activity, adopt a balanced diet, and participate in activities that stimulate the mind.

Legacy and Estate Finalization:

One of the most profound gestures of compassion and foresight is ensuring that your legacy, in the form of assets and wishes, is seamlessly transitioned to loved ones. Estate planning is not only about wealth distribution, but it’s also about reflecting your life's values, lessons, and memories.

Wills and Trusts:

The Basics: A will is a foundational estate planning document, outlining asset distribution and, if applicable, guardianship designations for minor children. Without one, state laws determine these decisions, which may not align with your desires.

Trusts for Nuance: Trusts offer more specificity in asset distribution and can help bypass the often lengthy and public probate process. They can be tailored to unique situations, such as ensuring care for a family member with disabilities or donating to a cherished cause.

An illustration of a pile of documents.

Beneficiaries and Joint Ownership:

Update and Verify: Life's milestones—marriage, the birth of children, or the passing of loved ones—should prompt a review of beneficiary designations on retirement accounts, life insurance, and other assets. It's easy to overlook, but it's crucial to ensure alignment with your current wishes.

Joint Ownership Implications: Holding assets jointly, often with rights of survivorship, means they bypass your will or trust and go directly to the co-owner. Understanding these nuances can help in harmonizing your overall estate plan.

Advanced Directives and Power of Attorney:

Voicing Your Wishes: Advanced healthcare directives, which may include a living will or treatment instructions, offer guidance on your desires should you be unable to communicate them due to health reasons.

Designating Authority: A durable power of attorney (POA) allows you to assign someone to manage your financial affairs if incapacitated. This individual can pay bills, manage investments, and make decisions in your best interest (

Tax Implications and Gifting:

Understanding Estate Taxes: The majority of estates aren't subject to federal estate taxes, but it's essential to understand the thresholds and potential state implications. Proper planning can minimize these taxes, maximizing what you pass on.

Strategic Gifting: Annual gifting to individuals or charities can be a part of a strategic estate plan, potentially reducing the size of your taxable estate. It’s a way of witnessing the benefits of your legacy while still alive.

A man examining a piece of paper he's holding with both hands.


Financial planning is not a one-size-fits-all endeavor; it evolves with each phase of life. From the financial innocence of childhood and adolescence to the strategic consolidations of midlife and the nuanced preparations of the 60s and beyond, each stage comes with its challenges and opportunities. The overarching message? Be proactive, informed, and adaptive. Whether you're safeguarding your child's future, fortifying your midlife finances, or ensuring a serene retirement, informed decisions lead the way. With the right knowledge, tools, and sometimes expert guidance, you can confidently navigate the complexities of financial planning throughout your life's journey. Remember, in the vast world of financial planning, it's not about predicting the future but preparing for it.

Adam Vega, CFP® profile image Adam Vega, CFP®
Adam Vega is the President of Avance Private Wealth Management. He has worked in the financial planning space for over thirteen years, offering planning and wealth management services to his clients.