From womb to tomb, an individual aggressively investing time and money, seeking for a future return.
Time investment take the effort of learning up new knowledge, spending quality time with family and coaching next generation.
Monetary investment take the effort of an investment strategy to invest hard earn money to reap an expected return to support future financial needs.
Return can be in the form of tangible or intangible return.
Tangible return will be an increase in real monetary wealth. For example: an increase in value in saving account and tangible asset such as houses and other financial instrument.
Intangible return will be an increase in knowledge capital and satisfaction through career advancement, happiness, recognition and contribution to the society.
Investment and return priority change over a person’s life cycle. The 5 phases in life cycle are
1. Growth phase
2. Accumulation phase
3. Consolidation phase
4. Spending phase
5. Gifting phase
Growth phase
This phase covers the day an individual is born until graduation with the objective of knowledge capital accumulation.
Parents are scarifying through dedicated effort in raising up children through care taking and providing sufficient education. The best return is satisfaction on observing the children grow healthier, learning up knowledge capital and become a useful person with successful career in the future.
An individual will focus on learning up knowledge capital to prepare for a successful future endeavor.
Accumulation phase
An individual in early to mid years of working careers, accumulating assets to satisfy immediate needs and long term goal.
In this phase, an individual entering job market, investing time and effort to earn an income for a living.
Dedicated to daily job activities, picking up new knowledge and moving up corporate ladder with income generated from successful career to support immediate needs (daily expenses, down payment for house and car) and long term goals (children’s tertiary education and retirement fund)
Besides daily job activities, effort on learning up financial knowledge to invest excess income is crucial. In this phase, we must emphasize the wisdom of investing early and regularly in one’s life. Funds invested in early life-cycle phases, with returns compounding over time, will reap financial benefits during later phases to support future consolidation, spending and gifting phases.
Successful investment of excess income will able to shorten accumulation phase and move into next stages towards financial independent.
Consolidation phase
In this phase, an individual typically past the midpoint of their careers, have paid off much or all of their outstanding debts and have sufficient assets to support long term goals.
The key focus is on future retirement and estate planning with priority on investing excess income for sustainable growth in assets to achieve financial independent after entering spending and gifting phases.
Spending phase
This phase begins typically after retirement. Living expenses are covered by passive income, an income generated from prior investment.
Priority on passive investment strategy to generate an annuity with sufficient income and assets to cover current and future expenses while maintaining a reserve for uncertainties, base on prefer life style.
Gifting phase
Gifting phase is an extension from spending phases where excess income from annuity generated from investment is used to provide financial assistance to relatives or friends , to support charity activities for others in need.
