By assessing your life at various stages can enable you not only to plan ahead, while also target certain financial achievements to ensure your well-being.
This is according to Errol Meyer, legal specialist from Standard Bank Financial Consultancy, who says that personal financial planning becomes easier and adjustments can be made as you go along.
Below, Meyer sets out how you should be saving during your lifetime.
Starting out and becoming established (ages 18 to early 30's):
At this stage, education and getting a car, rather than thinking about retirement are usually priorities. But, this is the time to begin thinking that far ahead.
At this stage of life, you should concentrate on developing life-time habits such as:
- Making sure that you pay yourself first. Decide what you want to save and put this aside before spending any money. You can build future financial independence earlier than you think if you decide, for example, to put away 33% of your earnings for the future.
- Learning not to compromise. Committing money to investments that stop you from drawing it out takes away temptation. A 12-month fixed investment is ideal. The money grows and you can’t get it.
- Putting together a budget. Deduct your compulsory savings and then set aside money for living and money for short-term goals.
- Consider starting a long-term fund. Investment portfolio’s that are aligned to lifestyle goals, such as education and buying a house are good ways to go. The earlier you invest the less the investment will cost and the more you will benefit.
- Wisely invest some of your budget. For example, cars just don’t hold their value. Buy a pre-owned car or downsize and you will have money available when you need it.
Moving on and beginning to accumulate assets (mid 30s to 50)
With your education complete and career path decided, you are now focusing on family and other responsibilities such as focusing on home loans, saving for the future of your children and other needs.
Typically, this is the time of your life when you get established and your income increases accordingly. You should be looking at:
- Increasing your contributions to medium and long-term savings mechanisms and taking out life insurance.
- Diversifying savings and moving into shares, unit trusts and other products.
- Reassessing your retirement savings and adjusting them if necessary.
- Making sure that you have a will.
Review your investment plans regularly and get a professional financial planner to assess what you need for the next stage of your life. As you approach 50, it pays to be realistic about your health and plan for contingencies that could result if your health doesn’t stay good.