The Four Stages of Life Road

Ed Lindbloom |

When it comes to your financial life, I believe that there are four stages: Accumulation, Protection, Distribution, and Wealth Transfer. Every person will pass though these four stages of life whether they are prepared or not. Planning is the most important requirement a person could take to navigate the four stages. Without proper planning, navigating through each step can be time consuming and expensive.

Accumulation is the first step of your financial life. What you accumulate and how much is vitally important. Accumulating assets that are sufficient to meet specific financial goals can take time and patience. Knowing how much money is needed to accomplish the goal(s) is the most difficult part of the accumulation phase. Understanding the goal and then planning to meet that goal are the key elements of accumulation.

Protection is how to protect the assets gathered during the accumulation phase. Protection of assets starts as soon as the goals of the accumulation stage are defined. Knowing and timing when markets fall and rise is nearly impossible to predict, so having a plan in place to protect accumulated assets, including yourself and your family, is the foundation of this stage. Protecting assets can be accomplished through using appropriate insurance products.

Distribution is the stage of using the assets that have been protected and accumulated. Understanding monthly expenses is the primary basis of this stage. Also, determining your specific inflation matrix is important. Every person has their own idea of how to spend money. Comprehending how money is spent on a monthly basis and then calculating your individual rate of inflation is vital to ensuring that financial goals are met. If your financial goal is retirement at age 62 with an annual income of $60,000, the proper distribution of accumulated assets will determine if you have to go back to work or not later in life.

Wealth Transfer is how assets are passed to your beneficiaries and heirs. Working with a qualified attorney to set up an estate plan is the primary step of this stage. The question that needs an answer in this step is "Where do you want your assets to go after you die?" Knowing this answer will save time and money as you meet with an estate planning attorney.

Accumulation, Protection, Distribution, and Wealth Transfer are the stages that people pass through during their financial lives. Knowing how to navigate these four stages is key to your financial success.