Suppose that you are a 21yearold college student. Then the student is currently in wealth accumulation stage of the financial life cycle.
Wealth accumulation stage definition
Simply put, wealth accumulation stage is increasing your net worth over time. This is typically done through a combination of active earning and investment. Individual wealth accumulation stage is a positive act – to a point.
The modern concept of retirement is built on the model of wealth accumulation through earning years, then drawdown when entering retirement. The FIRE (financial independence retire early) movement shortens the accumulation phase and lengthens the drawdown phase.
Here is what wealth accumulation stage looks like using average net worth by age.
Wealth accumulation stage is a fairly simple process to describe: the money you earn, through any means, is greater than the money you spend. As long as your income > expenses you are accumulating wealth. Your net worth is growing.
I’ll summarize some common components of a wealth accumulation strategy.
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