Each person goes through different stages of his life where he needs more money than others and that is why it is important to have a financial plan during the different stages of life. Having a different financial plan for all the different stages of life is very important to simplify life without financial problems.
Elements that are part of planning include budgeting, saving, making the right investments, ensuring security, protecting life and insurance income, managing debt, and transferring wealth.
To ensure the safety of your money, all items play a very important role in money management. First, categorize all your financial activities into critical expenses, essential expenses, priority expenses, and other expenses. Pay the utmost attention to critical expenses necessary for your survival. Consider the urgent needs and give importance to organizing funds to meet the urgent needs of your life.
In this article, we look at the four crucial life stages in which financial planning and their approaches are important to a debt-free life.
- income earning stage
- dependency stage
- growth stage
- retirement stage
1. Income Earning Stage
It is the first stage of your life when you enter the stage of financial gain. This stage is not only important for you to add money to your portfolio, but also to think ahead and make the right decisions. Budget your monthly income and make a plan to cover your financial expenses. With your disposable income, pay your monthly expenses and also save with your monthly income. Put an emergency fund on your priority list and put your money into it.
Earn a good amount of money for your retirement, which is very important. This seems pretty irrelevant at the moment, but after you stop working, you will need money that will come from your retirement fund.
If you have dependents, it is also important to have a life insurance policy that provides protection for your loved ones after your death. Even if you are not willing to buy a life insurance policy, you must have health insurance. Also, you need to have a UAE health insurance policy. A basic health insurance policy provides protection against your health. Employers provide this coverage to employees if they do not have health insurance that covers their earned income.
Owning a home or villa at this time becomes an option because all income from work is carried over to basic survival needs. Once you have enough income and savings, you can plan to buy a home.
2. Dependency Stage
Your financial planning becomes a requirement at this point, as you will have family members who will depend on your income. Start making the right investments for you and your family. Consider having term insurance that provides cost-effective protection. You should have a better budget and savings at this stage, as your monthly expenses continue to increase from this stage. If you live on a budget, having short-term and long-term goals for your family is also important.
Your short, medium, and long-term goals can be categorized with your children's future in mind, school and graduate tuition fees, plans abroad, marriage expenses, and other expenses. Adjust your budget to reflect the income and savings that best meet your needs.
If you are unsure, consult a professional who will help you create a secure financial plan. They will make estimates and offer you investment options. You can diversify your income towards investments and ensure the lives of your dependents.
3. Growth Stage
Managing your money wisely is very important as this will ensure that your income is properly transferred to the appropriate expenses. The growth phase is the golden phase where your plans will really pay off. Your investments will start to pay off. At this point, your income will be high and you can stabilize your growth. Control your expenses, which is very important because the idea is to maximize your savings.
Investment management is very important during this stage. Your financial goals will be rebalanced and money management will become critical during this stage. If you don't manage spending money, the growth phase will lay the foundation for the decline phase.
Don't neglect to invest in health and life insurance plans because they will help you when you need them. Invest in assets and obtain candidates for your investments. Distribute your property by making your will. This will ensure that your possessions are passed on safely to future generations.
4. Retirement Phase
The income you saved will pay off during this stage. The main objective is to control your expenses during this stage. Manage your investments to get the most out of your investments. Adequate health insurance and staying in shape become critical during this stage. The life insurance you have purchased for yourself and your family covers your dependents.
Reduce your unnecessary expenses and also reduce your multiple accounts, which will organize your money and reduce account management expenses. Update all your financial documents so you can access funds in a timely manner. Don't pay off any debt with money from your retirement savings. Dependents may be looking for their retirement money. Be sure to save your money to cover your expenses in retirement.
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