Third stage financial planning

Third stage financial living would be between 45 and 60 years old. This is a period for the seasoned financial planner to enjoy the rewards of earlier stages of budgeting, saving and strategizing.  
Typically, at this stage, you will be at the peak of your career. Your income would have risen to where you can easily meet or even exceed your monthly savings target; you will have the funds to cover at least three months of household expenses stashed away in a money market account; your retirement fund would be growing, even exceeding your initial plans; your student loan would have been fully paid and you would be in firm control of any debt.
As far as financial planning is concerned, you would have learnt enough to feel like an experienced driver of a brand new car called “my financial life”. The highway ahead looks clear and manageable.
The danger is not to get so comfortable in this zone of affordability so as to get back into the debt trap of the second stage of living. It is so easy to just start spending and spending, eventually falling back into a situation of unmanageable debt.
Where there is extra cash, here are three ways to reinforce your financial plan and press on towards moving into the fourth and final stage successfully:
1. Pay down or pay off the mortgage on your residence.
2. Stash more into retirement funds or investments that will provide passive income when you retire.
3. Prepare a legacy for your grandchildren – say, a trust that will meet their educational costs.
This is also the time for serious estate planning if you have not already started. Typically, you may have aging parents; your children may have left home to go to university or to set up their own homes, leaving you with an empty nest; grandchildren may be arriving. You may even be beginning to be more self-conscious of the effects of ageing.
During this third stage of financial life, it would be useful to really consider in detail how you will spend your life during retirement – where you will live, what activities you plan to be involved in, how often you may wish to travel overseas, where and for how long, what care or support you may require.
The answer to these questions can guide your investments. For example, you may choose to purchase a retirement condo, join a sports or dance club, or sign up for a vacation plan that includes timeshare resort occupancy.
You are in control. The more and more you can think through and settle these issues, the firmer you are pressing on to the fourth stage of financial life.  
Successful financial living is available to you whether your annual income is $40 000 or $400 000. It depends more so on your resolve to manage your life is such a way as to sustain a reasonable lifestyle for your level of income throughout your time on earth.  
All that is required is simple and rational decision-making in view of an overall goal: to get to a comfortable retirement. No great smarts are needed. It is available to us all. With this in mind, the next article will look at the fourth stage of financial planning.
• Louise Fairsave is a personal financial management adviser providing practical counsel on money and estate matters. Her advice is general in nature; readers should seek personal counsel about their specific circumstances.