The Financial Seasons of Life

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“This too shall pass” are words of wisdom and especially comforting when we are in a tough season. Everything, in this life, must come to an end.

Fritz at The Retirement Manifesto wrote a great post about the biggest lesson from his first year in retirement. In this post, Fritz talks about milestones and while they are great, life still goes on. “The sun sets on one day. The sun rises on the next. Life goes on.” I love that. Additionally, I thank God that life is full of seasons because it keeps things interesting and me growing.

Financial Seasons

As I am thinking about how life is full of seasons, I’m realizing the same is true with our finances. I’m still a fairly new wise manager of my money but I’m embracing it fully. That being said, this post is about the seasons, as I understand them, to our finances.

It is helpful to know which one we are in so that we can take the appropriate actions steps. Furthermore, recognizing financial seasons can be useful in planning for what’s coming next. One practice I plan to embrace through all seasons of my money is to:

  1. Give
  2. Save
  3. Spend

A healthy balance of the above keeps my relationship with money humming smoothly. Additionally, it’s what allows me to enjoy my money which I think should be done through all seasons…just with some intentionality.

If you develop a healthy relationship with your money early on, you should be enjoying it along the way.

Introduction to Money

This season can start as early as the elementary years if we start earning an allowance. This season really becomes tangible as we obtain our first jobs and have more money to manage. Hopefully, there are family members and educators teaching us some tenants of personal finance during this season.

I don’t have children but I do have a niece and two nephews and I give them financial lessons every chance I get. My relationship with money didn’t start out so great and I’m interested in helping my niece and nephews form a healthier relationship with money.

At this stage, there needs to be some skin in the game. For example, being responsible to save for a car, paying for car insurance and/or contributing to college in some way. There are so many young adults graduating from college with staggering amounts of student loan debt. While I think there are many factors contributing to this (too many to go into here), I think an obvious one is an obliviousness about the reality of paying it back. One hedge against that is to have some skin the game.

Let’s face it, there is a little sting in using our hard-earned money to pay for something. Kids should feel this early on. It’s a healthy response in developing healthy spending habits.

Wealth Accumulation

Also known as growing your money!

This phase can last decades and typically really gets started in our 20’s. If you go to college or trade school, you are spending money to invest in your future. However, once your training ends, you are ready to work in your chosen field. That sounds simple but is not always so linear. Many of us get out of college and reality is not exactly like we thought it would be.

We may start one career only to find it take us to another career. J from Millenial Boss best describes this as a jungle gym approach to your career in her interview on the ChooseFI podcast.

I think the key is taking full advantage of every job opportunity to get hands-on learning from our mentors and develop a stack of skills which will be transferrable to other more lucrative career moves. Then you can really focus on career hacking and make the most that you are worth.

I realize the early part of this phase may involve paying back student loans, saving for your first house, paying for a wedding, and building a nest egg to start a family. Those things will eat up a lot of your wealth accumulation. However, with intentionality to keep some of the main overhead costs low like housing, food, and transportation, you can still be saving for your future.

I recommend getting as close to maxing out your pre-tax retirements accounts as possible. Perhaps at first, you start small but work to ratchet that percent up over time.

In addition to growing your hard-earned income during this phase, you want some of your money to be working as hard as you are. This can be achieved by investing in low-cost index funds. When it comes to investing in the market, time is your friend so get started as soon as possible.

If you have children during your wealth accumulation phase, you may want to consider 529 accounts if you plan on helping your kids pay for college.

Wealth Preservation

At this phase, you are no longer accumulating money but rather trying to preserve what you built. Typically, this is your retirement.

The idea is to build a nest egg which will sustain you on the back nine holes of your life. If you build your nest egg through investments, you live off it by keeping it invested but at more conservative allocations. This way, as you are drawing down some money, the rest is growing. You’ll want a safe withdrawal rate so that your money doesn’t run out.

Some people build their nest egg through real estate and others through the stock market. A fine way to diversify is to do a little bit of both.

When we plan well for this phase, stressors like growing income, no longer have to be a part of our daily life.

As our bodies age, we slow down a bit. I fight this as much as possible by staying active and working out but still, the reality is that we face more body limitations later in life. Take things like extra healthcare into consideration when planning for your retirement.

Do you want to leave an inheritance to your offspring? Then you will want to plan that into calculating your retirement number and withdrawal rate. I like this book for thinking about your retirement number:

Additionally, you may have social security earnings in your retirement years. Nothing is for certain here so I recommend not counting on this but it’s wise to be aware of how it works.

Thinking about this phase as early as possible and mapping out a strategy is what will allow you to enter this phase successfully. And this includes what you will do with your time in retirement when you are not beholden to a 9-5 job. Typically, when people find their purpose or calling in life, they will keep doing it in retirement but perhaps as a volunteer. 🙂

Closing Thoughts

I’ve talked about three major financial seasons in life:

  1. Introduction to money
  2. Wealth accumulation
  3. Wealth preservation

However, inside of these seasons, there are also iterations of seasons like:

  • Debt payoff
  • Saving for specific goals (buying a house)
  • Career growth

The point is the seasons will change and so my advice is to ride each one out and embrace them fully.

Nothing lasts forever.

This will bring comfort when you are in the slow slog season of paying down debt but it also reminds you to savor every moment when you are in the season of retirement.

Reader questions: What season are you in? What motivates you to get through a tough season? How do you plan for the next?

Theme pic by Chris Lawton on Unsplash



1 thought on “The Financial Seasons of Life”

  1. I’m in wealth accumulation stage though society tells me I should be in wealth preservation stage due to my age. Just trying to balance the saving and spending – you are right that when we balance this plus give, we have a healthy relationship with money. And it is so comforting to know each season will pass soon enough – I can’t wait to retire into the wealth preservation stage!

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