An overview of financial well-being

We should pursue our personal and financial objectives relevant to where we are within the Life-Cycle Hypothesis, a generalized goal setting and financial standards model.

---

Prior to investing money and time into our goals, we should determine our personal (family) and financial goals/objectives, personal circumstances, financial circumstances, risk tolerance, and investment knowledge. Personal objectives deal with careers pursuits, investment planning, emergency savings, buying a vehicle, property, furniture and getting married, etc. Personal circumstances refer to present marital status, dependents/children (if any), and the costs associated with lifestyle. Financial circumstances cover an individual's willingness to save, his/her annual (family) income, employment stability, and current investment portfolio value. Risk tolerance consists of one's psychological willingness to bear risk coupled with their actual compliance to try to save money. Investment knowledge is a person's familiarity with investing money into an asset like a mutual fund or GIC, etc. The following are the 5 stages of the cycle:

---

---

STAGE #1 - The Early Earning Years

(Ages ? to 30) Most people within this section are typically just starting out. Perhaps, they have just begun or are about to complete their post secondary studies, which may be followed by student loan repayments. Regardless of their job title, they are at the lower end of their respective compensation band. Most have short-term goals, minimal income and available spending money, which is why a budget is very necessary. Travelling, buying and insuring a vehicle, plus, pursuing the dream of independence are their key goals.

STAGE #2 - The Family Commitment Years

(Ages 25 to 35) From an independent life, this person is ready to settle down. Marriage and children tend to be the next progressive steps. No longer one, family plans are paramount. Renting a bigger place or venturing into home ownership becomes a forefront priority. Obtaining insurance is also important.

STAGE #3 - The Mature Earning Years

(Ages 30 to 50) This group is now seasoned and should have most of their debts under control. They may have purchased a home and the majority of their furnishings and appliances, etc. They are likely to be established in their career of choice. By this point, they may be living out their dreams. Savings and investments options are far more realistic.

STAGE #4 - Nearing Retirement Years

(Ages 45 to 65) Building sufficient savings and a strong investment portfolio are very critical at this point, as retirement is quickly approaching. Since most of their children have moved out (if not all), parents can now focus more on their wants, needs, and look toward fulfilling future goals with pensions/investments income.

STAGE #5 - Retirement Years

(Ages 50 to ?) Many decide to write, travel, get more physically active, pamper themselves, and go about life with leisure. Their income is fixed, so it may be limited. Debts should be minimal, if any; depending on income, their financial goals should be short, inexpensive and necessary. Note: The Life-Cycle Hypothesis is a basic parameter of financial well-being. These generalizations are intended to be a gage, not an insult. Currently, many people at stage #1 postpone marriage to pursue higher learning/income, and attain their personal goals first. Some mature people are really at stage #1 because they are starting over again. Based on early retirement, company downsizing and self-employment, pensioners can be at stage #3, etc. $UCCE$$FUL Vernal Banton is a duly noted life skills author and coach who trains youth, young adults and adult newcomers on various hot topics including demystifying consumer credit and finance, gainful employment, independent living, home buying, superior sales and service, and successful living. You can find out more about his profile and media appearances at VernalBanton.com or by contacting vernal@email.com.

---