Financial planning thoughts differ at different ages. For example, when you are twenty, your thoughts might be very far away from planning for your retirement. When you are thirty, your thoughts are less focused on partying and potentially more focused on establishing yourself and creating a family. Here’s a quick financial plan and the different financial needs you should be planning for at every age.
Financial thoughts when turning twenty
In your twenties your life events are generally focused around leaving your parent’s home, finishing your studies, buying your first car, getting your first job, saving to buy your first home, paying off study loans and travelling. It is a time in life when there are a lot of financial demands and it is important to prioritise them. Here are some smart financial planning tips for this stage in life:
- Start budgeting by tracking your expenses.
- Try and avoid applying for credit cards and overdrafts to finance your lifestyle as this can get you into a spiral of debt that can take you years to emerge from.
- If you do use credit cards, be disciplined about paying off the debt as soon as it is due so you don’t incur interest charges.
- If you plan on getting married, it’s important you budget for the big day and your honeymoon.
- As a married couple, it’s important that you consolidate your expenses like your insurance and your medical aid cover. You will also have to revisit your will to include your partner.
- While retirement might seem far away, it’s never too early to start saving towards it! If you switch jobs in your twenties it is important to preserve your retirement capital as you move from company to company. You will probably be given an option to invest in your new employer’s retirement fund or a preserved pension fund.
Financial thoughts when turning thirty
By the time you turn thirty you should aim to be financially independent from your parent and have independent living arrangements. At this age you should have a financial plan in place that prioritises what you want in life whether it’s buying a home or travelling. By focusing on your priorities you can turn your dreams into reality and the thirties are the ideal time to plan and save for your future. Financial goals for this stage include:
- Having your student loans completely paid off.
- A year’s worth of salary saved for your retirement.
- A regular savings plan established with at least three months of income set aside for emergencies.
- Try and reduce your expenses on things like clothes and entertainment and invest more in property and savings.
- As your assets grow, it is essential you have a will in place that takes care of your assets in the event of your death.
- Consider opening tax-free savings accounts for your children and investing in low-risk unit trusts to pay for their future education.
Financial thoughts when turning forty
In your forties your future should be top of mind. The forties are your peak earning years and the ‘window’ to save for your retirement is shrinking. If you haven’t started saving for your retirement start immediately as you have a limited amount of pay cheques until you retire at 65. Financial goals at this stage in life include:
- Having three times your annual salary saved for your retirement.
- Established savings funds in place for your children’s education.
- Spreading your savings across a variety of investments so you are not too exposed to risk in any one area.
Financial thoughts when turning fifty
Financial planning in your fifties is crucial if you are to retire well. Your fifties should also be a time when you reap the rewards for your hard work and enjoy travelling. It’s important that you visualise the lifestyle you want to live in your retirement and understand what you need to do to achieve it. At this age you should:
- Have a close look at your financial plan to ensure you are on track to achieve your retirement goals.
- You should be aiming to pay off your property before you retire and any other major expenses, so you have fewer expenses as you lead up to retirement.
- It’s important to maintain your medical insurance at this age as you will start to rely on it more.
It’s important to realise that every stage of life has its own financial demands and requires a different type of planning. As you move through your life, review your financial plan constantly to ensure that it is still aligned with your needs and that it will protect your wealth both now and in the future.
If you are a South African living abroad and would like to know more about how you can maximise your finances through the process of financial emigration from South Africa, accessing your South African retirement annuity and our tailor-made tax solutions for South Africans around the world, contact FinGlobal today.