In The FinancialVerse – A Common Sense Approach for Your Money, I discuss three major stages of an individual’s financial life. I developed these stages by considering today’s demographic, economic, technological, educational, and lifespan trends. These stages are different for today’s generations than what the Baby Boomer and Generation X cohorts have experienced. The older generations in our society are firmly in or are entering the Fulfilling Stage of their lives and are dealing with the issues of longevity, aging, infirm parents, the costs of raising and educating children, the cost of health care, and emerging long-term care needs.
Most people experience three major stages in their financial lives: the Adulting, Striving, and Fulfilling Stages. Please be mindful that these stages apply for the vast majority of people. There are situations, however, where the suggested length of time in the stage will be more, or substantially less, than the suggested parameters I describe. An example would be if someone were able to generate a windfall of money through his or her productive efforts, an inheritance, or winning the lottery. They will move from what I call the Striving to the Fulfilling Stage of life. These types of events change the timing of the stages and can cause people to move from one stage to the other quickly.
In this three part blog series, I will introduce you to each stage and what you can expect to encounter. The first of these stages is Adulting.
The Adulting Stage
This stage takes place from birth to age thirty, when young adults, in my view, are finally not their parents’ responsibility. I also call this period - The Journey to Thirty. During this stage, the individual is educated, develops personal relationships, including finding a partner or friend group they affiliate with, finding steady employment or a career track to follow, and, lastly but most importantly, the individual is able to fully financially support themselves. To emphasize the last point, this would mean that the parents’ bank closes on their thirtieth birthday, unless a major emergency or unexpected need arises.
This period of thirty years is what many Baby Boomers will remember was either eighteen or twenty-one years for them. Many of you can still remember your parents saying that by the age of twenty-one, you need to be out of the house and independent. My dad kept telling me that by age eighteen, I was on my own. He said he had carried me as far as he could and it was time for me to step up.
The major financial events of the Adulting Stage include:
Obtaining a good general education in financial matters
Choosing a career path – professionally or technically
Choosing how to gain admission and pay for higher education
Establishing banking relationships
Developing healthy money habits such as budgeting and saving
Finding sustainable employment
Developing into a fully functioning adult in all respects
By the end of the Adulting Stage, the individual should emerge with a meaningful job and, most likely, student loan debt, which was used to finance a portion of their education. A distinct few will have accumulated sufficient savings—likely an emergency fund—and enough savings to afford a security deposit on a rental apartment or down payment on house. A very lucky few will have begun to save and invest for their Fulfilling Stage.
Summary
Each stage of your financial life has distinct questions, needs, and responsibilities. Each stage has its own key risks that must be addressed. You will need financial knowledge, coaching, and resources to get where you need to be.