Help me plan for my future
Most of us fail to properly plan for our future. Kids, middle age and retirement seem to creep up from nowhere and before you know it you’re worrying about where the money’s going to come from.
Unfortunately, a lack of planning for your financial security usually translates to a lack of future choice. This might mean fewer family holidays, having to work longer, giving up on the idea of the overseas holiday, the new car, the new kitchen or regular entertainment. It can even lead to a stressful retirement worrying about how you’re going to pay the energy bills and spoil the grandchildren.
Working out how much you need to fund the lifestyle you want – and the retirement you dream of – can be very difficult. However, there are some important things you can do now to start moving in the right direction.
Know what you want
Think about what you and your family would like to achieve and set some realistic goals. Some good questions to ask include:
- What do you want out of the next 10 years of your life?
- What about the 10 years after that?
- Do you want a career change?
- Are you burning to start your own business?
- Where do you want to live?
- When would you like to retire?
- What does your retirement dream look like?
- How much money will you need to live on?
- How will you manage the transition from work to retirement?
You probably won’t get where you want to be if you don’t take the time to plan and it’s worth speaking to a professional adviser to help set you on the right path. Financial planners provide a range of services that go well beyond helping people in their retirement.
It’s never too early – or late – to start
The power of compounding returns means that the sooner you start planning and putting money away for your future, the better that future will look. It’s basic maths. But if you spent your careless youth travelling the world and creating priceless memories, don’t worry – it’s never too late to start.
For most people, buying a home is one of the biggest investments they’ll ever make and paying the loan off as quickly as possible seems like the best way to go. It’s certainly good advice to pay as much off your loan as you can, but don’t forget about other investments.
Superannuation can be a very tax-effective investment for most people, and it’s worth taking the time to work out if you’re making the most of your entitlements and opportunities.
If you’ve already built up a lot of equity in your home, you might also want to think about using that equity to build wealth by borrowing against your home to purchase an investment property or shares. Of course, using the family home as security for your investments is not without significant risk, and you should always speak to a professional adviser before you consider this.
Know your investment profile
It’s important to make sure that your investments are matched to your needs, objectives, investment time-horizons and attitude to risk.
If you’re investing for the longer term (such as a distant retirement), or you’re happy to carry some risk in pursuit of the potential for higher returns, growth assets may be the way to go and have historically outperformed defensive assets. Conversely, if you’re extremely risk averse, or you’re getting close to retirement, you might prefer to invest in defensive assets, like cash and term investments.
A professional adviser can help you to understand the differences and available options.
Protect your most important asset
Many people worry about building wealth and protecting long-term assets like their house, only to forget about protecting their most important asset – themselves. Even the best laid investment plans will fall apart if the main source of income is lost through death, disablement or unemployment.
Speak to a financial planner early and make sure you have appropriate insurance cover to protect your family.
If you’re getting close to retirement, you might want to consider attending a seminar to build your knowledge and get you thinking about some of the key issues you need to address.
While changes to superannuation laws mean you can no longer endlessly top up your superannuation in the final years before retirement, what you do in your later years of work can still make a huge difference to the comfort you experience in retirement.
This is general advice only and doesn’t take into account your objectives, financial situation or needs.