Chapter 3 - Personal Financial Lifecycle Flashcards
BE SMART WITH GOALS
SPECIFIC—What?Why?Where?How?Who?-use precise language to describe the goal.
MEASURABLE—You must be able to confirm that the goal has been achieved.
ATTAINABLE—It must be possible to achieve that goal with the resources available to you.
RELEVANT—You should aim for something that is worth achieving.
TIME-BOUND—Set a specific time frame for achieving the goal.
What is a personal financial life cycle plan?
A personal financial life cycle plan presents your needs and wants at each stage of your life and matches them with sources of finance.
DIVIDE YOUR PERSONAL FINANCIAL LIFE CYCLE PLAN INTO 5 IMPORTANT STAGES
Dependence stage - dependant on parents or guardians
Independence stage -you can finance yourself
Emerging stage -you can also finance others (family,friends)
Pre retirement stage -you are building up your finances again
Retirement stage -you are spending your finances
Dependence stage
Age: 0-18 years
Baby,child,primary school, teenager,secondary school
Needs: food,air,water,shelter,books,clothes,fees
Wants: entertainment,phone,holiday
Sources of finance: Parents,Part time job money,child benefit
Might need to plan for debs/school trips
Independence stage
May go to college and start work(part time or full time)
May to an apprenticeship Or another form of training.
You will probably leave home
Needs: food,water,shelter,rent,electricity,oil,water charges
Wants:phone,tv,entertainment,car
Sources of finance: wage/salary, scholarships, Jobseeker’s Allowance, borrowings.
Emerging stage
Working and in countering life experiences such as love marriage children and community work.
Needs: Food,water,rent or home,clothes,shoes
Wants:Family holiday,a new car, marriage and wedding.
Sources of finance: wage /salary ,Jobseeker’s Allowance,borrowings
Enterprise
If you decide to become an entrepreneur (a person who start their own business)be sure to get all the advice you can.
Good planning is the key to a successful new business.
Pre retirement stage
Your children have grown up and moved on giving you greater freedom you continue to source income and save,travel,spend time with family and build better wealth.
Your needs and wants will depend on your circumstances examples health and family commitments
For example you might want to give financial help to your family members
Sources of finance: Wage/ salary, Jobseeker’s Allowance, and income from savings and investments
Changing job/career
As your goals change you may decide you want to change your job or career and do something completely different at work. Eg going for a promotion, returning to college, upgrading your skills, learning something new, or moving to a different part of the world
You need to plan for such changes and decide how you can best achieve your new goal and it is worth taking time to work out what is it that you can offer before applying for a new job.
You also need to be clear on how much you need or want to earn and if returning to college how will you survive this financially
Retirement stage
You have retired from work and are enjoying doing what you like to do.
Needs and wants: As above this will depend on your circumstances for example health and family commitments.
You may want to travel a lot more or to help your family out financially.
Sources of finance: Involves the transition from earning to spending
Example private pension,state pension, savings and investments.
