Phases of Financial Planning

By Margaret Ntifo

Most people want to retire rich, or at least retire with a certain level of financial security. We all want the peace of mind and self-dignity that comes from knowing that we are not at risk of ever becoming a burden on our families, the government or the state.

Knowing and understanding the three different phases of financial planning can act as a road map and help us prepare a good solid financial plan to improve our chances of meeting our life goals.

There are three different phases of financial planning:

1. The Accumulation phase
2. The Distribution phase, and
3. The Preservation phase

As the name implies, the first phase, the accumulation phase is the period of accumulating assets that will contribute to your wealth. This phase include your working years. First you learn to earn money, and then you determine how best to manage your money to make it grow into wealth. You can effectively do this by investing in different asset classes that will form the foundation of your wealth.

This phase provides a certain level of financial stability and most people never leave this phase their entire lifetime. However, majority of the population do not even enter this phase to begin accumulating any assets. They continually live from paycheque to paycheque without giving much thought to their financial future.

If you find your self in this phase, if you have invested in your first property (not your residential home), if you have started or purchased your first business, or purchased some stocks and shares, congratulate yourself.

Examples of common asset classes to contribute to your wealth include:

• Cash (Treasury Bills, Money Markets, CDs)
• Bonds
• Stocks and shares
• Land and Property (real estate)
• Precious metals

The best advice for those in the accumulation stage is to hold onto the assets you are acquiring, and allow time to work it’s magic. Set time-bound goals for how long you intend to accumulate your assets before moving on to the next phase. Work diligently on your plan and keep your focus.

Continually learn more about the different asset classes available and diversify by investing in several classes. Different assets have different qualities and strengths, as well as risk and rewards.

Investing in several asset classes is a sound investment strategy that can significantly increase your ability to reach your investment goals faster.

The distribution stage is the period when you get to enjoy the benefits of wealth, when you get to draw down income from your assets. It is the reason for accumulating assets in the first place. After years of planning, investing and accumulating assets by the time you reach this stage your wealth is generally assured. Often by this time, your income is on autopilot to recur almost without much effort on your part.  Most people can only dream about this phase.

The last phase is the preservation stage. This is the period when you plan to preserve and protect your accumulated wealth and prepare to safely transfer it to your rightful heirs.

In all three phases, there are three factors that can significantly erode the net value of your wealth. These are easily identified by the acronym PIT for:

1. Procrastination
2. Inflation and
3. Taxes

Whatever phase you are at in your financial plan, give careful thought to these three elements to reduce their threat to your net worth.

The key to reducing their threat to your wealth is to address them as soon as possible. The longer you wait, the more damaging their impact becomes. With the right investment strategy, you can enjoy your wealth, and simultaneously keep it intact.

The first most important step to financial planning is focussed asset accumulation. Start saving now to build and accumulate your wealth. Until you save, you cannot accumulate. The earlier you start planning, the sooner you will save, and the faster your assets will grow.

Copyright Notice: 2006

You may only distribute this article in its entirety providing this copyright notice and full information about contacting the author are attached.

Author: Margaret Ntifo is a Wealth & Prosperity Coach, a Women's Wealth Coach specialising in helping women design and create compelling lives and businesses to love..

Further information visit: http://www.MargaretNtifo.com/

Comments

[Claire "BusinessBlogAngel" Raikes]

Margaret this is awesome! I know about this stuff, I've coached about this stuff, but your words have really spoken to me. No one has ever really got me thinking beyond the accumulation phase - which I'm happy to say, I'm in right now. And making steady progress.

I don't really want to go through your entire program, but would still love to benefit from your coaching in some other way. Are you planning on offering a 'Lite' version of the MWP program, where perhaps its just email group and the teleconferences, for example?

[Margaret Ntifo]

Thanks Claire, from a goal-setting point, it's always good to have something to look forward to beyond the Accumulation stage. And yes, I am seriously considering offering a 'Lite', and shorter version of the MWP System that would focus on specific areas that individuals would need. Do watch this space, most probably after school term starts, when focus can return more to business...
In fact, I think you have given me a name for it, how about MWP Lite?

[Kenicke Treseme]

So what about charity? In what stage does one give money to charity? Do you reccommend this when starting to accumulate wealth?

What is the fastest way to become a millionaire?

[Margaret Ntifo]

What about charity? Are you asking this question because you want someone else to tell you at what stage to give to charity before you do? Or, do you instinctively know when to give to charity? When you ask the right questions you'll be sure to get the right answers! Margaret