The truth is, there is no single “place to begin” when it comes to planning for looking at your financial future; and there is no specific level of income or assets one needs to have in order to make that process “worthwhile.” You can begin taking action regardless of where you are in life, and regardless of how much money you have (or don’t have).

The first step is probably the easiest: identifying your present and future financial goals. If you’re like most Americans, those goals include making sure your loved ones are protected financially in the event you die or become disabled; managing your current expenses while paying down debt; buying your first home or helping your children pay for college; accumulating sufficient assets to retire without being a burden to others; and in time, distributing your assets to heirs in as tax-favored a manner as possible. If you’re fortunate enough to live a long and healthy life, and if you’re willing to develop – and then implement – a carefully thought out financial strategy, each of those goals may be within your reach.

As you move through life, you will likely pass through four different financial “life stages” - planning, building, achieving and succeeding. During each of these stages, your needs, goals and desires – as well as your ability to address them - are likely to change. Fortunately, there are steps you can take within each stage to help build and then maintain your personal financial goals. For example:

If you’re in the planning stage, you probably have both high expenditures and levels of debt. While you may be earning a fairly decent income, you may feel that you are unable to set much, if anything, aside for the future. Thus, you may want to consider limiting your focus to building the foundation on which your, and your family’s, future financial goals will rest. Steps you can begin taking right now include managing your cash flow without going further into debt; saving anything you can – even if it’s only a small amount – in a tax-qualified retirement plan (especially if your employer offers “match” dollars); establishing an emergency fund (most experts recommend three to six months’ income); and protecting against the loss of either spouse’s income.

Many people in this stage consider personally owned life insurance. Why? Because only life insurance pays an income tax-free death benefit your loved ones can be applied to pay off debt, help pay college costs for your children, replace income you would have earned over your lifetime and maintain their lifestyle.

Once you’ve reached the building life stage, your focus should be on using your present business or professional success to begin moving closer to your financial goals. Steps you can begin taking right now include increasing contributions to your qualified retirement plan (and thus decreasing your income tax liability); taking full advantage of employer-sponsored life, disability and medical plans; and setting money aside in potentially tax-favored college savings programs such as Coverdell Education IRAs. This is also a good time to review your life insurance protection to ensure it is still sufficient to meet your family’s growing needs should something happen to you.

Once you’ve passed through the building life stage, you will enter what is generally referred to as the “achieving” life stage. In this stage you will probably have accomplished many of your early financial goals. What’s more, you may finally have some extra cash – money you can use to do a few of the “special” things you may always have wanted to do such as helping you children or grandchildren get established financially, purchase a vacation home, or perhaps even retire early. But you’re not done yet. There are still steps you can take that consider how your financial goals will take into account items like taxes and potential penalties.

For starters, make sure you’re putting any excess cash you can into accumulation vehicles that provide either a tax deduction or which grow income tax-deferred; take full advantage of the new tax rules which allow certain individuals over age 50 to set additional sums of money aside into their qualified plans on a tax-deductible basis; and begin consulting with your tax professional for the timely distribution of your assets in a tax-favored manner. One strategy for managing retirement income is to combine your required minimum distributions (once you reach age 70 1/2) with income tax free loans from an eligible personal life insurance polic(ies).1 

The final life stage is called the “succeeding” stage because this is where you can finally begin to enjoy the fruits of all your hard work and planning. In this stage your debts are very likely paid off; your finances are in order; and you probably have some discretionary funds that allow you to travel or enjoy a few favorite activities. If you’ve planned carefully, the succeeding life stage is a time for doing what you want, when you want. But your personal financial goals aren’t finished yet. You still want to ensure that your assets will last for the rest of your life, and you want to be able to pass your assets on to your heirs in a manner of your own choosing. Nevertheless, now is the time to consult with an estate attorney to evaluate how you can maximize your estate and distribute your assets according to your wishes.

Working towards your financial goals is not something you accomplish just once… it’s something you keep accomplishing over the course of your lifetime – as you move through the various stages of life. But regardless of which stage you’re in when you start, the time to start is now.

This information is not intended as tax or legal advice. Please consult with your attorney or accountant prior to acting upon any of the information contained in this article.

Stephen Kyne is a Registered Representative and Investment Adviser Representative of Equity Services, Inc.  Securities and investment advisory services are offered solely by Equity Services, Inc., Member FINRA/SIPC, 28 Corporate Drive, Suite 100, Clifton Park, NY 12065.  Sterling Manor Financial, LLC is independent of Equity Services Inc.

1 Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event.  Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender.