Broker Check

Financial Planning

June 21, 2022

Financial planning is a process. It changes and evolves over time. While broadly used, it has become synonymous with investing or creating a Will. In truth, it is far more complex and varies from person to person. Ultimately, a financial plan is based upon one’s own unique goals and values. Below we break down financial planning by age group and career stage, and address some of the common priorities people have in those respective categories.  Please keep in mind that these are just some of the common financial hurdles, not all.


Early Career (ages 22-35):  


One of the most important aspects of financial planning during this stage is creating an ‘Emergency Fund’. This typically takes the form of cash or other less volatile cash equivalent investments. Generally, it is recommended to create an emergency fund with 6 months’ worth of expenses in it. For those who are self-employed or with volatile cash flow streams, closer to 12 months is recommended. Bear in mind that an emergency fund differs from general savings because it is reserved only for emergency situations, not last-minute trips or big screen tv’s. 


Other common financial issues facing this age group include paying off student debt, saving for a major purchase like a home or a wedding, and beginning to save for retirement. We generally suggest that an individual aim to save 10-15% of their income for retirement in their 20’s. Regardless of how much one saves, we encourage our clients to review and increase their savings on a recurring basis. For example, consider increasing your 401K savings by 1% each year or each time you receive a raise.


Career and Life Progression (ages 36-50): 


By this age, many have undertaken additional large expenses, including purchasing a home, children, and saving money for college. It may be prudent to consider a 529 college savings plan and perhaps budgeting additional funds for other variable expenses (e.g., unexpected medical expenses, summer camps, sports). It is also a good time to consider setting up a Will and Power of Attorney.


50/30/20 rule: this ratio suggests that 50% of one’s monthly income should be reserved for one’s needs, 30% for wants, and 20% for savings. In this context, ‘needs’ might include rent, utilities, groceries, and other expenses. ‘Wants’ could include dining out, travel, or other optional expenditures. By age 40, one should be aiming to save 20% of their income.


Pre-Retirement Planning and What’s Next (ages 51-65):  


This is the last push leading up to retirement. Often, people are in their peak earning years and are trying to save as much as possible. Understanding what one’s monthly expenses will be in retirement becomes more important as this will help to identify how much money will be needed. Often, we will create Monte Carlo simulations for our clients using their expenditure estimates.  


A Monte Carlo Analysis runs multiple simulations of your financial plan against future market conditions. The result of introducing random investment volatility to the analysis produces a range of values that demonstrates how changing investment markets may impact your future plans. In addition, this is when social security planning, pension planning, and planning for healthcare costs in retirement become more important. 


Retirement and To-Do List Phase (ages 66+): 


Hopefully by now the potential retiree has begun to develop an estimate of their monthly expenses, healthcare costs, and other expenditures that will be incurred during retirement (i.e., travel, bucket list, grandkids). Estate planning and the potential to leave a legacy for future generations may be a focal point for the investor. At this point, individuals need to make sure their estate plan is up to date, including reviewing Wills, Trusts, and Powers of Attorney.


While all the topics above are important from a tactical standpoint, we encourage clients to think about how they want to spend their retirement years. It is often that people who pursue purposeful activities in retirement find the most fulfillment (e.g. travel, volunteering, part time work).





By breaking down a financial plan into distinct stages, the strategic evolution of that plan is magnified. While no two plans will be exactly alike, common financial milestones can act as reminders to plan proactively. We’ve tried to lay out some of the common financial hurdles each client may face, though no two financial plans are alike. Ultimately the plan is driven by the unique goals and values of every individual. Financial plans should be reviewed annually due to changes in tax law as well as major life events.


Would you like to learn more about our financial planning process, setting up an emergency fund, or even your Monte Carlo score? Visit us at our website ( to start the conversation, no matter what stage of life you are in.  


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.


The AdvisoryOne Group and LPL financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.