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Money Cents

What Stage Of Your Financial Life Are You In?
By Shelley Phillips-Mills
May 23, 2005 - 9:56:00 AM

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Are you a builder, a cruiser or a coaster? These may seem like farfetched labels for describing yourself, but depending on what stage of your financial life you’re in, you may fit into one of these categories. By better understanding these categories and your investing goals, you can work toward establishing a solid financial plan.

The Builders. If you are younger than age 35, working to establish yourself financially and professionally and possibly just getting started on a family, you may be a builder. Builders still have some time before retirement and are in the initial stages of their financial lives, therefore they can afford to be a little bit more aggressive with their investing.

Builders are mostly focused on managing any debt they may have accumulated and at this stage it’s important to develop systematic savings strategies. The majority of your portfolio may be focused on equity investments, such as stocks. A smaller portion of your portfolio may also be invested in fixed-income securities, such as bonds, and the smallest part would be invested in cash or liquid investments, such as money market or savings accounts. However, it is vital to also have some liquid investments for emergencies – usually three to six months of living expenses.

The Cruisers. Cruisers, between the ages of 35 and 50, are more established professionally and may have a family to provide for financially. Cruisers are usually getting closer to retirement age and should focus on accumulating assets for retirement as well allocating some of their portfolio to income needs that may arise.

At this point, you may be trying to save for and pay children’s expenses, such as tuition and weddings. Your investment mix might still be focused on equity investments in order to continue to build a solid foundation. However, there may be a need for your portfolio to start shifting towards more investments in the fixed-income sector, such as Treasury securities and bonds in order to begin receiving some income and bring more stability to your portfolio. Still, just as before, you may want to maintain a small portion of your assets liquid in the event that you need to dip into these funds.

The Coasters. The coasters – aged 50 and older –are either preparing to retire or already retired. In this phase, your financial needs are very different than they were just a few years ago. Income becomes the most important component of your asset allocation as you work to pay down long-term debt and focus on estate planning.

When you reach this stage, most of your investment mix may likely be in fixed-income securities, which provides you a steady income stream. You may still have some portion of your portfolio invested in equity securities but it should no longer be the main focus. In addition, some liquid assets are always handy as unexpected medical and other expenses may be more difficult to manage without a monthly paycheck. Keep in mind that reviewing your insurance needs at this time becomes crucial, as well adjusting your financial plan to accommodate major life changes.

As you can see, determining your financial goals early, and consulting with your financial consultant to determine the most appropriate allocation based on risk tolerance, time horizon and investment objectives can help you establish a solid investment plan. If you would like to receive the A.G.Edwards’ publication, “Taking Control of Your Financial Future,” please contact financial consultant, Shelley Phillips-Mills in Bangor at 1-800-947-5456.

This article was provided by A.G. Edwards & Sons, Inc., Member SIPC.


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