Financial Planning As Per Life Stage

13 mins read
Financial Planning As Per Life Stage

Creating a financial plan is not rocket science. You just have to devote your time and ensure that all ingredients are in the right place. A financial plan that is perfect for you may not apply to someone else. So we have made tips on how to create a good financial plan depending on what stage of life you are in.

  1. If you are doing your first job or have a few working experiences, read stage 1
  2. If you are recently married, skip to stage 2
  3. If you are a parent, then skip to stage 3
  4. If you are near to retirement, then skip stage 4

Stage 1: Financial planning for an unmarried young professional


  • Low bank balance
  • No dependents
  • Unmarried
  • No major financial liabilities like car or home

Your financial guide:

  • Start saving: Although you might want to spend your all earnings as it is the first time you are feeling financial independence, or maybe you feel that you don’t have enough money to start saving, however, in reality, it is the right time to start investing even if it is a smaller proportion. For instance, if you’re 22 years old and manage to save Rs 30,000 in your first year, then at 10% per annum, your money will grow to Rs 5,25,935 in 10 years.
  • Invest in equities: As time is on your side, equity is the best option for you to generate high returns in the long run. You can invest in a ULIP, which gives you the option to manage funds between equity and debt. As you are young and have no major financial liabilities, keep a high proportion of funds in equity as compared to debt.
  • Buy term insurance: As an unmarried young professional with no dependents, you might be thinking to avoid a term insurance policy but being unmarried doesn’t mean being alone. If your parents have taken up an education loan for your studies, it is your time to repay it. Therefore, you should buy term insurance that would ensure that in the case of your death, the insurance amount can be used to repay loans. Some term insurance plans also offer payout in case you are diagnosed with critical ailments, like cancer, chronic liver ailment, etc. As more and more young professionals are becoming susceptible to these ailments, it becomes important to buy term insurance now whose premium increases with age.
  • Ensure your health: If your current health state is making you think against buying health insurance, then you should also make it a reason to buy the mediclaim policy. As you are young and healthy, you will get the mediclaim policy at low premium rates. Moreover, in most of the insurance policies, there is a waiting period of 3 to 4 years before the insurer covers some ailments. Therefore, one should buy health insurance even if they don’t feel the need for it, rather than being sorry when the time comes.
  • Create a contingency fund: Start a contingency fund to use in case of emergencies. Usually, this should be equivalent to 6 to 24 months of your monthly expenses, as per your risk appetite.

Tip: Start investing early to enjoy the power of compounding.

Financial Planning As Per Life Stage

Stage 2: Financial planning for a married couple


  • Increase in financial liabilities, like home loans, car loans, etc.
  • Personal goals might include planning for a child’s education, marriage, retirement, etc.
  • Mayor may not have adequate insurance covers

Your financial guide:

  • Set your goals: Before creating a roadmap for financial planning, it is the time to first define your goals. It can include buying a house/car, child planning, etc.
  • Buy/enhance insurance covers: As the financial liabilities have increased in life, it is the time to build or review the insurance portfolio. Buy term insurance to protect your family against life’s uncertainties. In case you have already bought the term insurance, you should enhance the coverage amount to ensure it is in sync with your current liabilities. Also, for health insurance, take a family floater that covers your dependents also. You can also add your spouse or kids to your existing health insurance policy if any. Make sure that the coverage is sufficient for each member of the family considering the rising medical inflation. Those people, who depend on corporate insurance policies, do remember that corporate insurance covers cease to exist after retirement or job change, and therefore, it is best to buy a separate insurance policy.
  • Build a contingency fund: Assess your contingency reserve to ensure it should have funds equal to 6 to 24 months of your monthly expenses, including EMIs if any. While it is important to have a contingency reserve, it is equally necessary to ensure that it should not be used for big-ticket expenses like funding a vacation, buying a car, etc.
  • Achieve your life goals with the right asset allocation: The investment should be based on one’s risk appetite and be spread across different asset classes to cut risk and get risk-adjusted returns. While traditional investment options like PPF, National Savings Certificate, and Senior Citizen Savings Scheme (SCSS) give fixed returns, these may not be sufficient to beat the inflation rate in the long-run. Here, equities are the best bet. Not only equities help in wealth creation, but they are also apt for meeting long-term needs, like a child’s education, marriage, retirement, etc. Investing in equity doesn’t only mean investing in stocks only. You can also invest in ULIPs which not only generate high returns in the long run but also protect your wealth from market volatility by offering guaranteed returns. At the time of maturity, either you will get assured benefit or fund value, whichever is higher.

Tip: Stay invested in the market through ups and downs.

Stage 3: Financial planning for parents


  • Requires funds for children education
  • Personal goals like bigger houses, vacations, etc.

Your financial guide:

  • Buy a child ULIP plan: As soon as your child is born, buy a child ULIP plan to finance the growing needs of your kid. The plan will not only give sufficient money to fund your child’s education but will also secure his/her future in your absence. In the case of death of the parent, the insurer waives all future premiums and the policy continues to offer coverage till the maturity.
  • Buy/enhance insurance cover: If you haven’t bought a term insurance plan, it is the time to make a move. Also, if you have a term insurance cover, make sure it is sufficient as per your current financial liabilities, like child’s education, home loan, and other expenses.
  • Invest in equities: To generate high returns in the long run, buy a good wealth plan that would help you meet various needs like child’s education, vacation planning, and bigger house. A good mix of equity and debt helps you beat inflation while safeguarding your returns from the market volatility.
  • Buy ULIP retirement plan: While securing the future of your child, it is important to protect your life post-retirement also. As the time is on your side, invest in a good ULIP retirement and park a major portion of your fund’s inequities. Moreover, if the market volatility is troubling you, then you should buy a retirement ULIP plan which comes with a guaranteed feature. It means, in any case, you will not lose at least the invested amount.
  • Cover your kids under family floater health plans: If you have a family floater health insurance, cover your child under the plan. However, if you don’t have any health insurance, buy a comprehensive health insurance policy.

Tip: If time is on your side, invest in equities to reap the maximum returns.

Stage 4: Financial planning for retirees or people about to retire


  • No fixed source of income
  • Rely on dividends and interests from investment
  • Children are financially independent
  • Ample time to pursue hobbies
  • Increase in medical expenses

Your financial guide:

  • Have a clear idea of your current situation: At this stage, you have retired or planning to retire in the next two or three years. You might have built a portfolio of investments by this time to tide over financial contingency. However, in case there is no investment portfolio, you should reduce your expenses to a level that is sustainable. In case you do not control your expenses, you might find that you outlive your funds, and it is a situation you should not be in.
  • Create a health contingency fund: As the age progresses, the chances of falling ill are also increasing. So you should create a separate contingency fund only for health emergencies. Also, if you don’t have a health insurance policy, you might find it difficult to get a policy at this age because most of the insurers would either deny the policy or charge a high premium. So, you should create a separate health contingency fund to finance your medical needs.
  • Maintain correct asset allocation: At this stage, make sure your invested amount is not at high risk, and therefore, minimize your exposure to equity. However, it is also believed that even retirees should keep their funds in equities to beat the inflation impact. Though traditional investment plans may give fixed returns, they may not generate sufficient returns to beat the inflation impact. So, keeping some funds in equities is a good choice.

Some other investment options for you:

  • Senior citizen saving scheme
  • Post office time deposits
  • Monthly income plans
  • Reverse mortgage

Tip: Make sure to be debt-free before retirement.

Most of the people avoid financial planning as they think it is just about budgeting. However, in reality, financial planning is about making smart investments to meet long-term needs and that too without budgeting. Moreover, you can buy investment options online also which further saves your time.

So, start investing Today to secure your Tomorrow financially!

Pratima Singh

Pratima is a content writer at Moneymint. As a Finance enthusiast, she loves sharing tips and tricks to help others navigate the financial sphere.