Wealth Management Tutorial 1 Theory

Challenges of Financial Planning

• Financial planning is a learned skill, not an innate ability
• Learning financial skills can be difficult due to limited access to education and resources
• Family disagreements and lack of financial knowledge can contribute to a "fear of finance"
• Having a financial plan helps allocate income towards important financial goals

Importance of Financial Planning

• Everyone needs a financial plan to establish, track, and achieve financial and personal goals
• A financial plan helps allocate income towards important goals, both current and future

Stages of the Financial Life Cycle

Stage 1: The Early Years

• Focuses on wealth accumulation and setting the stage for family and financial lifestyle
• Characterized by buying a home, managing debt, saving for future goals, investing, planning for taxes, purchasing insurance, and beginning an estate plan
• May be complicated by marrying at a later age, divorce, or remarriage

Stage 2: Approaching Retirement

• Focuses on final efforts to accomplish retirement plans and create wealth
• Characterized by reviewing insurance protection and estate plans
• Goals include paying for a home and children's education
• May be interrupted by corporate downsizing, voluntary career changes, responsibility for aging parents, or death of a spouse

Stage 3: The Retirement Years

• Focuses on preserving wealth through management of savings and assets
• Characterized by insurance needs changing, with increasing concerns for medical or nursing home care
• Estate planning efforts to reduce taxes and protect assets for heirs
• May be complicated by remarriage, postponed first marriage, responsibility for aging parents, or chronic health care needs

Financial Goals for Newlyweds

• Short-term goals: paying off debt, reviewing insurance coverage, and saving for an emergency fund
• Intermediate-term goals: saving for a home purchase and other assets to support lifestyle
• Long-term goals: retirement savings and planning for children's financial needs with additional financial planning for insurance, savings, and estate planning