GOALS:103  – Understanding the financial life cycle of a typical individual

GOALS:103  – Understanding the financial life cycle of a typical individual

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I write these posts for young people who are about to begin their working lives or have just started a family. The earlier they set about planning for life goals the better. I do hope they find these posts of use. Others reading them I hope, will pass them on to the youngsters amongst friends and family.

Understanding the “financial life cycle” of “typical persons” is critical when working on our Life Goals – Because, however, unique we may feel, different our lives and unique our challenges are; in reality the vast majority of us have uncannily similar lives that carry on in almost identical manner – unless its someone unconventional like say Osho!

That reminds me of one of his lectures, wherein he explained the power of our mind to see what we want to get – Someone who he knew, had never noticed the magnificent red Indian Posts’ mail box standing prominently at the nearby by intersection despite having taken that road to work for the past many years. However, when one day his father handed him a letter to be posted, he suddenly notice it standing right in his path !!

That’s exactly how goals work. A well crafted SMART Goal will enable you to suddenly locate resources in places where you had never noticed them earlier.



This fact has been recognized as long ago as in Vedic times, when ancient Rishis identified sixteen stages in human life, from birth to death and prescribed “Shodasha Karma” (sixteen rituals) to be performed. From these were derived the “Four Ashramas” (Life Stages) through which every normal man ideally goes through: (1) Brahmacharya: (age 8 to 21 years) Remain celibate and  a student, to acquire knowledge in preparation for the next stage. (2) Grhasta: (lasting 25 years) Householder contributing to society by being religious, making a family and creating wealth    (3) Vaanaprasthashram: ( many consider this begins only after the birth of a grand child) Herein, one is expected to prepare for the last stage i.e. renunciation; by gradually withdrawing from Stage 2 above whilst engaging in community work and beginning spiritual pursuit (4) Sannyasa: ( around 75 years age) complete renunciation from worldly affairs and dedication to spiritual questions. Many moved into forests and led secluded lives.

Its hardly surprising that, the Sannyasa was the first to become redundant – I too cannot see any sense in moving into the harsh forest, leaving my comfortable urban city life. Moreover, these days, when the large family and community based social structure has given way to dispersed nuclear families; I believe there is really no need for us to move into the forests in search of Vaanaprasthashram – because, considering most end up as “empty-nesters”, given the right outlook can find it right at home!

Look around and you will agree that, our lives tend to end in Grhastaashram. Having said that, I would guess not many would a progressed very beyond that stage even in the Vedic times considering that, till mid 20th century Indian life spans did not go beyond 60 years.

The Indian model tends to be more about spiritual aspects of life. I would therefore, rather use a Western Life Stage model which seems better suited for the scope of this post and without wishing to go into a right or wrong argument, I dare say, even more relevant for our materialistic times.

Also this one is universally applicable; except that, the timing when the stages begin and end may differ from person to person. I therefore, strongly believe that, those starting off in life should follow this model when they make their financial plans to provide for their life goals even when their personal life stage may not match.

Why? Simply because, whilst the timing of say your marriage or birth of your children could be in your control; the date of your retirement will not change to suit. Unless of course you happen to be the Queen of England. Basically, for typical persons, their earning lives are really predetermined.




This is a popular chart, taken from – Arthur J. Keown, Personal Finance: Turning Money into Wealth, 4th ed. (Upper Saddle River, NJ: Pearson Education, 2007) shows all the elements so well that, there really is no need to reinvent a new one.

As with the Indian model, here also, we have 4 Life Stages:

(1) Getting ready for life – our formative years ( Up to age 25 years)

(2) The acquisitive stage (Up to about age 50 years) – when we make and develop our family,  acquire assets and wealth.

(3) The accumulative stage (between age 60 to 65 years) – Children gradually move out – when we begin preserving and building wealth for our retirement.

(4) Living in retirement, when we live off our saved wealth.

I am going to try and examine these charts closely. Such information when available earlier on in life, could prove invaluable when preparing our Life Plan – which involves identifying our life goals and working out ways to accumulate resources (financial included) and cover risks, to enable accomplishment of goals.

Keown’s chart (the first one) is more about demonstrating our financial planning needs across the life stages of a typical working person. This chart indicates that, people normally begin a family between the ages 25 to 35 years and fulfill their duties around family development  at around age 55 to 60 years. Retirement begins at age 65 years.

On the other hand the second chart [Figure 4.2 from Mattessich and Hill (1987, 460)] is study of the resource constraints resulting in financial stress across life stages.

This life-cycle research can be useful when planning for  resources. It shows how typical families are most likely to have insufficient resources in the early child-bearing stage, but are most likely to be dissatisfied with their resources when their children reach school age.

The life stages in this chart are far more detailed and can be very helpful when goals are being identified. The six yearly cycles will also enable you to come up with realistic financial plans to accumulate resources. The trends in deficits of resources (which closely follow insufficiency) will highlight the need for proper budgeting, cash flow management and accumulation of emergency funds. This study has also tracked dissatisfaction ( a result of insufficiency) which is a time for us to watch out for emotional stresses in family lives. Which is the reason this study has also been used to identify stages at which the family is most susceptible to disintegration (with special reference to couples who separate not long after the birth of a child mainly due to financial stress).

Finally, Keown’s chart (the first one), clearly identifies all the elements of a good financial plan in relation with a typical person’s life stages. Each of these elements indicates an inherent risk, a cover against which will only come for a cost, that will need to be budgeted for from time to time.

It should by now be very evident that, a Life Plan is not merely a bunch of wishes and dreams – but a well thought out, time bound, action plan to accomplish clearly defined goals, through efficient use of limited resources.

We started our discussion on Life Goals with Dr Kahneman’s quote ” Happiness is what is at the core of every human effort. All the fame and money you get is useless if you feel no happiness at the end of it – in which case, I would say you are a failure”.

However, after studying “Life Stage Cycles” it does seem like our lives, at a macro level eventually turn out to be similar; in the way they progress and also in the dissatisfaction and pressures we experience – and I cannot but wonder, why then are some people more or less happier than others? Surely, there must be much more to happiness than Life Goals, Life Plans and Financial Plans.

I will leave you to ponder on that……….

CLICK HERE for Goals 101 – Why does not having goals, mean setting up yourself for failure ?

CLICK HERE for Goals 102 – How to be amongst those 1% that actually achieve their goals?


Create your future : Identify and Articulate your Goals




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2 Replies to “GOALS:103  – Understanding the financial life cycle of a typical individual”

  1. Many plan well – only the fin.part. Very few plan / think about being happy in life. I feel (worry) that the number of people who are unhappy is increasing day by day. Fin.planning ,for obvious reasons, gets done at different stages of life – whereas, planning for happiness is done on a daily basis : while getting up in the morning one needs to decide to be happy throughout the day.

    1. Late PL Deshpande the renowned Marathi thinker and writer said which loosely translated “It is said the rich cannot sleep because they are worried about their money and the poor cannot sleep because they are hungry – its better not to stay awake with money rather without it!”. Money cannot buy happiness but it surely makes our search for it considerably less painful.

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