Which phase of your financial journey are you currently navigating? Are you ready for what lies ahead?

Life is all about transitions. From finishing school to relocating or beginning a family, our lives evolve and grow. Similarly, our financial objectives and priorities shift over time. This article will explore three key financial stages and offer guidance on how to successfully manage each one.

What are the 3 Phases of Your Financial Journey?

Experts have pinpointed three phases we all go through with our money: wealth accumulation, wealth preservation, and wealth distribution. Throughout these stages, your financial needs evolve. Knowing what each phase involves can help you get ready and reach your financial dreams.

1. Accumulation

Think of this as the time when you're laying down your financial foundation. You're working, making money, and getting your credit score up. But it's not just about earning; it's crucial not to spend everything you make. This period is all about saving and putting money into investments, including for your retirement days.

Knowing what each phase involves can help you get ready and reach your financial dreams.

Starting early is the secret to growing your wealth. The sooner you begin, the more you can benefit from compounding interest, which really adds up over time. Here are some ways to make the most of this building phase:

  • 401(k) Plan: Often offered by employers, these plans come with tax benefits. Contribute regularly to reach your retirement goals, and don’t miss out on any employer match, which is essentially free money towards your savings.

  • Individual Retirement Account (IRA): If your job doesn't offer a retirement plan, look into IRAs. A financial advisor can help you choose between a traditional or Roth IRA and plan out your retirement savings.

It's also important to keep some of your savings easily accessible.

  • Money Market Accounts: These can offer higher interest than regular savings accounts and usually let you write checks or use a debit card.

  • Emergency Fund: Life throws curveballs, like sudden car fixes or medical bills. Aim to save up three to six months of living expenses in a savings account where you can earn some interest. Start by saving a bit each month, and it'll add up.

By focusing on building your retirement and savings now, you'll be well-prepared to protect and enjoy your wealth in the next stage.

2. Preservation

Think of this as the transition phase. It's easy to miss when you've started this part of your financial journey. So, when does it kick in? You're generally in the holding steady phase when you're about a decade away from needing to dip into your savings or retirement funds. This could be as early as 52 for some or closer to 62 for others.

Now's the time to take a closer look at your investments. Figure out what's doing well and what could use some tweaking. It might be a good idea to spread your investments around a bit more, picking a mix of stocks and bonds that lines up with how you see your retirement unfolding. The key here is remembering that the closer you get to retirement, the less wiggle room you have to bounce back from any financial hits.

You might also want to think about annuities, ways to manage your taxes better, plans for handing over your business if you have one, and what to do with any property you own. Are you going to keep paying off a house, buy a place to escape to, or maybe downsize? Chatting with a financial advisor can help sort out these choices to make sure they fit your unique needs and goals.

3. Distribution

This is the time to start sharing the fruits of your labor. It kicks off a year before you plan to start using your saved funds. Just like in the holding steady phase, you'll need to examine your investments once more, but now with the goal of lowering your risk.

When planning, consider moving some of your portfolio to safer investments. You don't want a sudden change in the market to significantly dip into what you've saved.

How you decide to spread out your wealth impacts how long it will last. This is a crucial time to talk to a skilled wealth manager who can guide you through investment choices and tax matters to prepare for this phase. Also, consult with an estate planning professional who can assist you in deciding how to set up your legacy and pass on your assets to your loved ones.

Preparation is Key

We all move through these money stages – accumulation, preservation, and distribution – and taking control of your finances is the best strategy for preparation and optimizing your wealth.

If you need more tips on how to budget or handle your money better, don't hesitate to contact us here at i-bank!


Experts say that nearly all the money you'll have when you're older depends on how much you save in the first 20 to 30 years.