Explain the essence and importance of each of the stages in the financial life cycle

What will be an ideal response?

Answer: The overall financial life cycle allows you to better understand the timing and areas of financial concern that you'll probably experience. It allows you to focus on those concerns earlier and to plan ahead to avoid future financial problems.

Stage 1 is a time of wealth accumulation, initial goal setting, home purchase, family formation, insurance planning, saving for goals, and some tax and estate planning. It's a time to develop a regular pattern of saving because it's tempting to spend rather than save. Consumers are ages 18 through 54 in this stage.

Stage 2 covers ages 55 to 64 or the golden years approaching retirement. This is a transition from the earning years when you will earn more than you spend. Much of the financial activities will be spent in fine tuning. Consumers put an emphasis on tax and estate planning, paying ourselves first, and insurance planning.

Stage 3 consists of the retirement years, for most people age 65 and older. Consumers reap the benefits of sound planning or the losses from unsound planning. You will attempt to ensure continued financial security and perhaps work part-time.