Money serves different purposes in different stages of your life and the life of your business. If you are a business owner, you know that you need money for different reasons at different times. Part of wealth management is understanding the financial life cycle so you can better plan your spending and saving habits. Whether you are a business owner or an individual, the financial life cycle will look similar, even if the specifics are different.

There are four main stages of the financial cycle with several elements that are somewhat fluid between each one. That’s because your primary goals shift throughout your life (or your business’s life) but most elements of maintaining financial health still play a part in some way, no matter what stage you are up to.

Stage 1: Early Career

When you first start out in the working world, either as a business or as an individual, you often don’t have much money and all of that money is going into starting your career. You have basic expenses as well as preliminary financial goals in order to become more financially secure. This is the stage where it’s important to create a budget and learn to stick to it, as this will become a crucial skill as you move forward. It’s also a great time to start building credit by using a credit card and paying off your bills on time. Good credit will be an asset to you in later years when you want to do something like buy a house or take out a loan for your business.

Stage 2: Growing Wealth

After working for a few years, your income will gradually start to increase. This is an important part of growing your wealth. Growing income gives you more opportunity to build your savings as well as begin your investment portfolio. Even if you don’t have much to invest yet, you are setting the stage for the future when hopefully you can start to build those investments. When you invest, it’s important to make sure you diversify your investments, meaning not putting all your money into one or two of the same kind of account. You want some accounts that are maybe higher earning but higher risk, as well as other accounts that might earn less but are safer. A financial planner can help tremendously in helping you get started with your investment portfolio.

During this stage, it’s a great time to make a list of short- and long-term financial goals and work towards them. Whether you want to buy real estate, travel, build funds for your children’s college, plan to expand your business, or any other major life or business goal, you need to know what you’re planning for and then have a strategy for how you will get there financially. Don’t forget to start planning for retirement, too. It’s never too early to start that retirement account; in fact, the earlier you start, the more time your account will have to grow.

Stage 3. Managing and Protecting Wealth

At this stage, you will hopefully have amassed enough wealth that you now need to figure out the best way to protect it and nurture it to continue growing. There are many different avenues you can take to manage your wealth and a financial advisor can be invaluable here. Your expenses will also likely have grown, and you may have several dependents, so you will need to continue budgeting while also managing your investments and your savings. Your life and business goals may change over time, and your financial plans and habits should have some flexibility to meet those changing goals or circumstances. Again, your financial advisor will help you navigate these changes so that you remain on track with your financial security.

Stage 4: Distributing Wealth and Retirement

When you retire, you are no longer earning an income, so the budgeting skills you built from early in your career come majorly into play once again. Hopefully, you spent your working years amassing wealth and building your investment portfolio so that you can enjoy retirement with little financial stress. Your financial advisor can continue to help you plan how to use money from your investments and how to best budget your money to last you as long as possible. This is also the time when you will want to update your will (or write one, if you haven’t yet) and plan your estate. 

If you approach your working life with these financial stages in mind, it will help you direct your energies appropriately toward the different goals of each stage. Doing so will keep you more financially organized and responsible. At DeSantis, Kiefer, Shall, and Sarcone, our expert financial advisors and planners will help you through each stage of the financial life cycle so that you can reach your goals and maintain financial health.