Financial Planning for All Ages

Comprehensive Financial Planning Strategies Tailored for Every Age Group to Secure Your Future

Here are three financial planning templates, useful for people at various ages. Each of these templates explain the most important points on age based investing that one should remember during starting his personal financial planning, given here. This is a best fit for using as a template to your finance in a better and efficient way. 

This article does not intended to discuss  about the financial planning terms or actions. But, discusses about the must have considerations during planning your finance considering your ages. By providing some very useful and most important hints and ideas, it certainly help you to plan your finance in a better way.

Financial Planning for people at age group of 20 – 35

Between the age group of 20 to 35 considers as the wealth accumulation phase. This is your golden time to make and save maximum money through proportionally investing on various investment vehicles. consider short, medium and long term goals to do right investments and investment mixes. It is the best age to have maximum equity exposure considering high risk taking capacity at this age. I prefer and advise to have an 80% exposure to equities as it is the best time to create wealth supported by the young age. It is also a right time to makes things happening in your own way by having and practicing budgeting in your life and family.

Budgeting provides with lots of advantages. 

Another must have at this age is adequate protection from various troubles. Insurances are the best friends that would help you to get this done. Here you can find the required insurance for a family to refer.

This age group also required to take care to not fall in debt. Responsible use of credit cards and utilizing right loans are required more attention. If you have debts, you should consider paying off the same before starting your financial plan. To allocate your funds, a portfolio proportion of 80% in equity and 20% in the debt instruments will be excellent for those who are in this age group.

Consider below investment instruments to build an equity portfolio:

1. Direct stock investments – Aggressive style with mix of large cap, mid cap, small caps
2. Diversified / Sector / Thematic mutual funds
3. Index funds and Exchange Traded Funds (ETF)
4. Unit Linked Insurance plan - Investments
5. Real estate investments - Read two unknown real estate investing ideas.
6. You can even add high risk commodity options and futures to your portfolio at this time by considering your risk profile.
7. If you are in India, opening and regularly parking money to the PPF account would be a good option.

For 20% debts side, one can consider fixed deposits that giving compounding interest and secured government bonds. Well performing debt funds and money market funds also can be added to the portfolio.

This is the right time for you to start investments for your kid’s future. You can start and account for your kid at this time. Consider to have one with compounding interest and add little amount in each month to it for your kid.

If you have any long term plan like buy a home, kid’s education or marriage etc, this is the right time to plan your investment portfolio to achieve these goals.

Financial Planning Template 2 – Age group of 36 – 45

If you are in the age group of 36 to 45, you now have to take care of family, children and other dependents. As a person who is the bread winner, you should consider to protect your life with maximum coverage. Identifying and subscribing a cheap and best term policy with enough coverage would be the best option at this point. 

Your entire family should be under the coverage of a good medi-claim policy and you should cover your assets and vehicles with third party liability policy. This is the time you desperately need an emergency fund to build with sufficient money that would work as a buffer for you to protect from financial issues and risks. 

As a recommended practice, hold an amount equal to your 6 months salary and to a separate savings account to work as an emergency fund for you whenever required. Here is an article explaining the the best methods to create an emergency fund.

It is the right time to teach your kids about the best money practices that they will never forget to do so to their kids later.

A person within this age group should consider a balanced portfolio than previously said aggressive one. A portfolio proportion of 60% in equities and rest in pure debt instruments will work better for you. 

Investment instruments one can prefer to meet the 60% equity portfolio.

1. Direct stock investments – Balanced style. Large cap companies from defensive sector like Pharma and FMCG would work better.
2. Balanced Mutual funds
3. Index funds
4. Gold ETF
5. Unit Linked Insurance Plan – Pension Plan

Best debt investment options :

1. Liquid Funds - Best over bank FDs
2. Fixed Deposits with Banks
3. Savings Bonds
4. Maximize contribution to employer pension plan, Provident Fund or 401k
5. Well secured bonds from government or public companies

You should be well aware that this is the time to plan for your pension too. Above investments should focus as per this requirement along with the needs of your kids future.

Financial Planning Template 3 – Age group of 46 – 55

If you are in this age, you are near to your pension. So must be careful when dealing with money and investments. A considerable portfolio at this time would be be 20% to the equity and equity related investments such as mutual funds and rest 80%  in secured debt instruments.

Medical insurance is a must at this age.

You can have the following to your 20% equity portfolio

1. Stocks – Highly defensive, heavy weight blue chips
2. Balanced mutual funds
3. Exchange Traded Funds that tracking major indexes

As we are giving preference to the debt instruments to your portfolio, consider to park your money to the following instruments.

1. Secured bank fixed deposits
2. Capital secured liquid funds
3. Fixed Maturity Plan (FMP) mutual funds.

Never, ever invest with ULIP insurance plans or equity at this time. Especially, you should deal with your pension fund and never touch the same for investing plan. A person near to the pension age  always prefer to park his money on secured vehicles and that should allow easy access such as liquid funds and bank FDs.

Always prefer to invest on any instrument that you have good knowledge with. I never encourage a person to directly invest to the stocks because of the knowledge and time required to identify good companies.

While planning your finance, it is better to have a well qualified and experienced financial planner than any investment trusts or companies that offering investments behalf of you. If you getting a good financial planner, that is enough for you and he can bring you up by providing all the necessary knowledge and updates time to time.

Retired? What is now?

Once retirement life started, be careful with your money and select only instruments that provide 100% security and government support. There are several government supported monthly income plans available from banks and other sources. This is your golden time and enjoy with all the benefit from the savings and investment happened during your various ages as said above.

Remember, this article nor limited to any boundary or type of money. This is in general and applicable to anybody from anywhere in this world. The only drawback is, I am not aware about the type of bank deposits from different countries and how the interest of the same is adding or calculating. You have to hunt and select the better one available at your place..

Best wishes to all the readers to have a most successful and fail proof financial plan. Have a golden time..