Financial Planning by Life Stage - or Not?

Investoid has an interesting post up today about saving when you are young and it made me start to think about how financial advice tends to be grouped by age. To a certain extent this makes sense, but we all know that people take wildly different paths and one person may be working with 10 years of saving under thier belt at age 30 while another may be just finishing up their medical internship with tens of thousands in debt.

When I read financial planning advice aimed at "people in their 30s" I am always thinking about the numerous ways that I am different. I am single, which puts me in with "people in their 20s", but my financial milestones are in other ways closer to "people in their 40s".

For this reason, I was thinking about what other ways we could categorize life stages apart from age for the purpose of financial planning advice. Here are a few other options I came up with:

• By net worth - this is an obvious one and works well to a point, but inflation and differences in cost of living may make absolute numbers seem too arbitrary. I would try to improve it by measuring net worth in multiples of annual income. For example, stages could be negative net worth, zero to one year's salary, 1 to 3 years salary, etc.
• By debt level - I'm not positive about this but it seems like it should be part of the picture. For example, if you have $200,000 net worth with no debt or $200,000 of net worth with $400,000 of debt then you are in two very different positions. The debt level has a direct impact on cash flow, which is a very big part of financial planning.
• By career/family stage - this is closer to the traditional age-based approach but would use milestones such as graduate university, get married/have kids, buy property, etc. so that non-traditional timelines would still find their fit.
• By timeline to retirement - someone who wants to retire in 10 years has certain things that they have to take care of regardless of their age or other factors. Perhaps Canadian Dream (free at 45) has more in common with a 48 year old planning to retire at age 65 than with most other 28 year olds.

I think that all of these approaches could offer improvements on the age-related financial advice that we see so much of, and some could be combined for even better fits. The problem is how far to go. We don't want to have 100 categories, each with slightly different plans and advice, and we don't want it to be too confusing for people to find their correct category.

My solution? I think that the best way is to decide how many categories you will have - I think that seven would be sufficiently detailed - and then give people a short quiz that puts them in the right category. This is a free brilliant idea for someone who needs a new angle on personal finance book writing... any takers??