After age 30 it’s likely that financial planning will increase in importance and become a far more serious matter.
It’s worth thinking about how things have changed over the past few generations; more and more individuals are going to universities, people are having children later, are buying property (and by definition therefore taking on mortgages) at later ages and everyone is facing up to a longer life and a (much) later retirement. All at the same time as an upsurge in the number of people working for themselves and a speedy collapse in occupational pensions.
Taken as a whole, this leads to one conclusion; having a structured financial planning approach to navigating through these “mid-years” (roughly defined as from 30 to 50) is more essential than ever, possibly even critical.
What are the main aspects?
One: have a plan. It may seem obvious, but many people don’t!
Two: accept that the time ahead may be different to today and plan accordingly. There is no guarantee that interest rates will remain so low, that property prices will always go up, that the government lifeboat (for example State Pensions and universal healthcare) will always be there, to mention but a few. It’s only one generation since interest rates of around 13% were commonplace. 0.75% seemed implausible! Any decent financial plan will cater for different future scenarios.
Three: revert to strategies that have stood the test of time; save first, borrow second. Only borrow what can be afforded. Any financial plan will have saving as its centrepiece.
Four: maximise everything. Ensure (as much as one can) that there is adequate insurance cover in place to provide for your dependants in the event of your death and for yourself and your family in the event of either long term ill-health or the onset of a ‘critical illness’; that any investments (including, and maybe particularly, pensions) are invested to get the best growth. Again, it may sound obvious but many people leave their monies in high-charging and/or under-performing investments for decades at a time; structure plans and investments to minimise tax, particularly into the long term (for example, is there a better ‘tax haven’ than ISAs?) and then with borrowing make sure that the costs of the borrowing are low and that they can be afforded even if these costs rise with little or no warning.
Finally, spend time financial planning. Find a plan which works and write it down; work with the best professionals to execute this plan and then continually keep it under review, adjusting where necessary to cater for individual circumstantial changes as well as wider economic changes. Most people, traditionally, have spent more time planning their annual holiday than planning their finances. Spend time on planning the holiday by all means, but more time on the longer term financial plan.
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