A lot of financial planning guide books define it in many ways, but I like to make things simple. For me there are only four (4) stages in a person's financial life:
1. Start-up Stage
2. Build-up Stage
3. Asset Allocation Stage
4. Retirement Stage
Let's go through it one by one.
The Start-up Stage.
At this stage, a person depends as much as 100% of his income from either a job, or a "starting business" which is the only source of income he has. If ever he quits his job or close the business, he will have nothing to eat on the next coming days. (This "starting business" is often called self-employment). This a stage where we make ends meet. We work and spend 100% of our income. Sadly this is where a lot of people are currently found. They work hard, but spend even harder.
The Build-up Stage.
In this stage, a person has already developed the discipline to save and invest his money to different kinds of investment vehicles (more on this on my future post) on a regular basis. Mostly, a person in this stage can already allocate 20% of his income to investments and can live with his 80% as his living expenses. He also has little gains from his small investments which cannot yet provide a substantial assistance to his total income.
The Asset Allocation Stage.
People in this stage have already gained the proper experience and has given enough time and importance in understanding how money works. They plan their financial life well and save enough to re-invest in their businesses or to start a new business plan. Most people in this stage can already allocate 40%-50% of their income to new business ventures and other types of investment. Also, it is important to note that in this stage a person does not only depend on a job or business but he already has multiple streams of income (others call it cash cows).
The Retirement Stage.
At this stage a person has already mastered how money works. He has all the freedom he wants. He now focuses on the more important aspects of life like spending more time with his family, having monthly vacations, providing more jobs and helping the poor. He has fully achieved the financial plans he made during the early stages of his life. Also during this stage, the person is no longer concerned with his own welfare, he takes into consideration the community around him and has already carved a legacy that will last for centuries. On average, a person in this stage does not depend on a simple business but rather he relies on the many large corporations that he has full control of, that 80% of the decisions come from him.
Know where you are among these four stages...
I hope we all are in agreement that our goal is to be in the retirement stage. It does not matter what age you are right now, what matters is that we all want financial freedom. The earlier we get to the retirement stage, the better.
Now to wisely plan and guide you to financial freedom, evaluate yourself on which of the stages do you belong. Knowing the definitions and the premise of these stages, do your best and strive to move on to each stage one step at a time, 0r better yet make small baby steps at a time.
On my next post, we will go on the details on how to fully evaluate on which stage you really are.
Don't forget to leave your comments for this post.
To our financial freedom....
Cheers!
so im still in the build up phase
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