And finally, there are also phases where the amount of money coming in is about equal to the amount we are spending. For example this can be the case of young families.
Our life phases are determined by many elements that have an impact on our revenues and expenditure: our family situation, our professional evolution, our lifestyle and also our liabilities like borrowing for a mortgage, as well as the help we may receive from the state (such as student grants, retirement pensions or family allowances). Other factors like personal taxes, the level of interest rates and, in general, the economic environment also influence our future revenues.
Usually it is possible to plan when to move from a life phase to another one. However sudden changes of fortune – an accident, illness, the loss of a job… – can also happen suddenly and considerably change our personal situation. That’s why we should always build into our planning some buffer for periods where our spending could be higher – or our income lower – than expected.
Understanding which phase of life we are in, estimating our future financial needs, saving and spending our money wisely while putting some money aside for rainy days – that’s what financial planning is all about.
A financial adviser can help you to establish the investment strategy that is best adapted to your situation at each phase of life.
