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 younger generations than what the Baby Boomer and Generation X cohorts have experienced. This is the second of a three-part series that explores these stages. Today we will discuss the second or Striving Stage.
The Striving Stage
This stage takes place from ages thirty-one to seventy, resulting in a likely forty expected years of employment. During this period, today’s young adults entering the workforce will likely have between ten and fifteen different jobs.
I know there is some controversy around increasing the age for ending full-time work to age seventy. I believe age seventy is the age most people will work to either as a result of projected changes in the retirement laws (e.g., Social Security and government retirement regulations) as well as the need for individuals to work longer to accumulate sufficient savings for the much longer life expectancy they will experience in the Fulfilling Stage.
The Striving Stage is the forty years an individual has to pay all their living expenses, pay for the cost of raising a family (if this is what they decide to do), and accumulate sufficient funds and income to provide for the Fulfilling Stage. You need to view these Striving years as your key source of funds for your financial life unless you are the beneficiary of an inheritance or other windfall.
What are you going to do to make the most of these Striving years? What approach do you want to take to balance work needs and personal needs? How hard are you willing to work? What jobs or fields of endeavor interest you such that you will want to spend forty years or a significant time period doing? How do you educationally prepare yourself and your offspring for this long journey?
There are many questions to ponder, but the answers can and will differ for each individual. Lifelong learning will also be needed. After World War II, we sent people to college with the understanding that the education they received would last them for their working lives. Today, this is not the case. Too many changes take place in such a fast manner that the ability to learn new knowledge quickly is a skill that each individual must master to be successful. The ability to continually learn new things is a skill we all need today. Fundamentally, having current marketable skills pay the bills.
The key financial skills you will need involve:
Deciding what your financial lifestyle will be
Having a working budget
Making decisions on what to buy versus just use,
Developing good saving habits
Learning to invest your savings for the Fulfilling Stage
Managing health care costs, and
Providing insurance protection for your dependents’ needs and your income.
By the end of the Striving Stage, you should have accumulated sufficient sources of funds and/or income streams to be able to fund your Fulfilling Stage. You will notice I do not use the word “retirement,” as I believe it will become obsolete in a few years. If you are going to have a good chance to live to age one hundred, you will not want to play golf or sleep until noon from age seventy onward. Most people will want to do something meaningful with their time and physically will be able to do much more than prior generations of aging Americans.
Accumulation of resources for the Fulfilling Stage should include providing for the costs of whatever pleasure activities you want to pursue. This will include whatever charitable and/or community activities that are chosen. These costs would be combined with having sufficient health insurance and providing funds for unforeseen financial emergencies such as a major illness, long-term care protection, major house repairs, and the real risk that you will live much longer than you think possible. We will discuss understanding and providing for the costs of the Fulfilling Stage later.
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 knowledge, coaching, and resources to successfully navigate each stage. Next week we will cover the last stage of your financial life – The Fulfilling Stage.