There are four financial cycles during a person's adult life: Early Life (25-35), Primary Earning Years (35-55), Nearing Retirement (55-65), and Retirement (65 plus). Each cycle brings about different financial issues. Through looking at each cycle as a separate phase of life, you will be able to develop a financial plan for your life.

Cycle One: Early Life (25-35)

Because you will be starting your career during this cycle, and will probably not have a large amount of money saved, "Early Life" may be the most financially difficult cycle. Decide which investments are most important to you. This may include placing a down payment on a first home, or beginning a college fund for young children. Try not to become bogged down with too many investments.

Make sure you have set aside enough money to cover an emergency. It is important to keep the equivalent to three months income in your savings account. Do not spend this money unless it is a true emergency, because this can also serve as safety net for any emergencies that may arise in later life cycles.

During this cycle saving for retirement should begin. It may seem far away, but it is important to start saving at an early age in order to avoid unpleasant surprises later. Your job may offer a 401k plan - which is an excellent way to begin retirement savings. If a 401k is not available, Individual Retirement Accounts (IRA's) are available.

Begin investigating different saving options. There are many options available, and it is very important not to put all of your money in one place. These options include bonds, mutual funds, savings, certificates of deposit, and money market accounts. Invest money into several of these savings options; a diverse portfolio is less risky if the economy takes a turn for the worse.

NOTE: Common stocks are a gamble. Although they may reap a higher reward over a longer period (25 years or more), they may also lose money and end up being worth considerably less than the original amount of money that you invested.

Cycle Two: Primary Earning Years (35-55)

The two goals that you should set out to achieve during your primary earning years are to reduce debt and invest wisely. During this time, home owning and saving for children's education arise as important goals. Because this is your prime earning period, it is also the best time to make large investments. In addition to the investment suggestions in cycle one, you may want make investments in the area of property or a vacation home.

• Continue to set money aside for retirement. This is also a great time to check into a life insurance plan.
  
  
• Take advantage of tax breaks that are available.
  
  
• Remember: The key word is "diversity." You want to diversify your financial portfolio as much as possible.
  

Cycle Three: Preparing For Retirement (55-65)

This is the time to concentrate on securing ownership of assets and retiring loans. Try and pay off your mortgage, cars, and college expenses. It is advisable to erase these debts before retirement.

It is important to begin looking for any investments that can serve as extra income after retirement. Remember that this is a time to be conservative. Take money from riskier places (stocks) and place them in more stable vehicles (mutual funds, annuities, bond funds, etc.). You may be able to reduce your taxes by adding a tax-free bond fund.

If you work for the government or a large company and earn a salary, you may be eligible to receive retirement benefits. Pensions are becoming more of a rarity, but they do still exist. During this cycle, find out about these funds to clearly understand your retirement needs.

If you are self-employed or work for a company that does not provide a pension, seek out advice about post-retirement investment of your 401k or Keogh funds. You may even consider converting your rollover funds to a Roth IRA, so that future appreciate avoids tax upon withdrawal.

This is the time to inform your family of your investments. Information provides security in case something happens to you. If you have grandchildren, begin to consider setting aside money for them.

Cycle Four: Retirement (65 And Over)

After retirement, your focus should be on maintaining a steady income and protecting yourself from taxes and inflation.

During this time, if your investments must generate your income, invest carefully in stocks that will grow. Invest in income generating stock and bond funds. Annuities can also provide security and potential for moderate growth. Again, the objective is to protect you from inflation and provide you with a steady cash flow. While investing in income generating stocks, do not completely neglect the other investments in your portfolio, such as growth stocks and mutual funds; just make sure that an increasing proportion of your investments focus on income rather than growth. Seek out professional advice to determine the right balance for your individual portfolio.

Remember: Life expectancies continue to increase, so look at the long term.

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