Life Cycle of Financial Planning “Take Charge of Your Finances”

Life Cycle of Financial Planning “Take Charge of Your Finances” Advanced Level

1.11.2.G1 Financial Planning Many people follow a similar financial pattern during their life BUT Everyone has an individualized financial plan Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Financial Planning Financial planning - a tool used to achieve financial success based upon the development and implementation of financial goals Financial goals - specific objectives to be accomplished through financial planning Financial Goals should be SMART goals Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 SMART Financial Goals State exactly what is to be done with the money involved Write the exact dollar amount Determine how it can be reached, which is often determined by the individual’s budget Do not set the goal for something unattainable or unrealistic Specifically state when the goal needs to be reached Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 What influences a person’s financial plan? Many factors that can be expected or unexpected: Values, Goals, & Personal Choices Major Life Events Life Cycle Needs Lifestyle Conditions Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 The choices you make today impact your future! Choices and goals made in the present may have a significant impact on your future financial plan Values, Goals, & Personal Choices Life events that affect your financial plan may be unexpected Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Major Life Events

1.11.2.G1 What are examples of lifestyle conditions that may affect a person’s financial plan? Marital status Age Income Number of dependents Education Employment status Health status Values, Goals, & Personal Choices Major Life Events Lifestyle Conditions Economic outlook Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Financial Life Cycle Life cycle - a series of stages through which an individual passes during his or her lifetime Typical financial life cycle pattern applies to most people and affects a financial plan Values, Goals, & Personal Choices Major Life Events Life Cycle Needs Lifestyle Conditions Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Typical Financial Life Cycle Single * Marriage * Start and Raise Family Approaching Retirement Years Retirement Years Stage 3: Wealth Distribution Stage 2: Wealth Accumulation Stage 1: Basic Wealth Protection 0 20 30 40 50 60 Years of Age 70 Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 80

1.11.2.G1 Financial Life Cycle Stages Stage 1: Basic Wealth Protection Focus on building financial security Stage 3 Stage 2 Stage 1 Which stage of the financial life cycle are you in? Stage 2: Wealth Accumulation Head of household has reached peak earning years, is accumulating wealth, and approaching retirement Stage 3: Wealth Distribution The consumption of wealth, usually during retirement Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 What types of financial planning would occur during each stage of the financial life cycle? Stage 1: Basic Wealth Protection (protecting your future) Stage 3 Stage 2 Stage 1 Develop emergency savings Develop positive credit Begin investing in retirement Purchase insurance Stage 2: Wealth Accumulation (giving it to yourself) Investing to build wealth Purchasing a home Stage 3: Wealth Distribution (giving it to your chosen ones) Estate planning Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Typical Financial Life Cycle Stage 3 Stage 2 Stage 1 What factors or events in a person’s life could cause the typical financial life cycle to change or vary? Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Financial Life Cycle Events Activity People in certain age groups tend to have similar financial life cycle needs Determine what types of financial planning may occur for each age group. Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – Developing a plan for eventual independence – Preparing for career – Evaluating future financial needs and resources – Exploring financial systems – banks, etc. – Developing a personal system of record keeping Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – – – – – – – – – Establishing a household Training for a career Earning financial independence Determining insurance needs Establishing credit Establishing savings Creating a spending plan Begin investing in retirement Developing a personal financial identity Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – – – – – – – – Child-bearing Child-raising Expanding career goals Investing in retirement Managing increased need for credit Discussing and managing additional insurance needs Creating a will Starting an education fund for children Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – – – – – – Upgrading career training Developing protection needs for head-of-household Investing in retirement Establishing retirement goals Building on children’s education fund Need for greater income due to expanding needs Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – Assisting with higher education for children – Investing in retirement – Updating retirement goals and plans – Developing estate plans Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – – – – – – – – Consolidating assets Re-evaluating property transfer Investing in retirement Evaluating expenses for retirement and current housing Planning future security Investigating retirement part-time income or volunteer work Meeting responsibilities of ageing parents Planning for long-term care insurance and medical care in retirement Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 Traditional Age Group Financial Planning Needs – Re-evaluating and adjusting living conditions and spending as related to health and income – Adjusting insurance programs for increasing risks – Finalizing will or letter of last instructions – Acquiring assistance in management of personal and financial affairs – Finalizing estate plans Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

1.11.2.G1 True or False? Everyone has the same financial plan FALSE! Individualize your financial plan but consider the typical life cycle needs for every age group. Family Economics & Financial Education – Revised May 2011 – Introduction to Finance Unit – Life Cycle of Financial Planning – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona