Your financial journey is going to be unique. The achievements you hope to unlock, the strategy you employ to get them, and the order you do things will be all about you. However, your journey will contain a lot of the same key elements most people deal with in the process of unlocking their achievements.
Early Game
You will start your financial journey by saving. That requires knowing how much you spend, where you can save, and what you are saving for. You’ll be deciding which achievements you’re hoping to unlock long before you can get there. This is the basic framework for a spending plan. You can use tools like Monarch or YNAB to help you with this.
You will move past the spending plan and focus on growing your wealth. You want to get some money invested so that you can achieve your own permanent financial independence one day. To get that money invested you’ll need to choose an account type and custodian, develop an understanding of good investment portfolios, and eventually choose one to implement in that account. Then you just have to keep the savings (from your spending plan) rolling in!
Once you have a spending plan and your investments are growing over time, you can move on to achieving some of those early life goals we’re all excited about. You can unlock achievements like becoming a homeowner or getting married. You can move on to start a family, plan for your children’s college, and taking life-changing trips! Don’t let me decide for you though, accomplish them in any order you like! Remember, this financial journey is all about you.
At this point, you will have built an awesome financial foundation to live on. The downsides are still there though, you will always face risks. You will need to protect yourself and your loved ones against some of these risks. You should purchase the proper insurances, implement an estate plan, and make sure you are always maintaining a good cash savings balance to put yourself in a comfortable position if something happens.
Late Game
You then need to choose how to accomplish the biggest achievement of them all – retirement. Your retirement will look different than everyone else’s. The timing, substance, and financial cost of your retirement will be unique to you. You need to know how much to save and what you will ideally spend in retirement, then work toward hitting those milestones so that you can actually do it. You likely won’t be able to work for your whole life, so planning ahead is extra important.
Lastly, you will need to build a distribution strategy. You will need to decide which accounts to withdraw from at each stage of retirement and what portion of your income will be supported by more guaranteed sources like social security, pensions, or annuities. This is something you can look at from a short-term tax perspective (IE: what taxes will I pay this year) and also a long-term tax perspective (IE: if I pay taxes this year, will I save money over time?) Distribution strategies are an active step, just like the spending plan. You’ll be revisiting it each year as your financial circumstances change.
E Z, right?
You have to do a lot in order to properly build a financial plan. Unfortunately, if you’re reading this from the U.S. you don’t have much of a choice. The default difficulty for you is high. If you want help with all of this, don’t hesitate to reach out. You can book some time on my calendar or send me an email.
I wish you good luck. May you roll a crit on each step.