Most people have a unique bucket list of adventures and achievements they are keen to experience in their lifetime. Some include trekking up Mount Kilimanjaro, others long to take a hot air balloon ride over Cappadocia in Turkey or watch the Monaco Grand Prix live in person.
No two bucket lists are alike, but there is one item that adults of all ages need to consider including on it, and that’s developing a storm-proof financial plan.
A robust long-term financial plan will not only empower you to make those bucket list items a reality, it will also enable you to leave a lasting legacy for the people you love.
The younger you are when you put those plans in place, the better, says John Manyike, Head of Financial Education at Old Mutual. "It’s easy to be distracted by things that give instant thrills like a new 4x4, but there are significant long-term benefits for those who plan ahead and delay some of these thrills.”
A key motivator for savers is compound interest. The sooner you start saving, and the longer you save for, the greater the positive impact of compound interest on your savings. As you get to earn interest on your interest, it accelerates the rate at which your savings grow.
When you are young, your overall financial dependents and responsibilities tend to be lower, which means it’s the ideal time to start investing in your future and lay the foundations that will enable your money to grow.
Ingraining financial discipline in your daily life when you are young also helps to make saving an effortless habit. You get used to paying yourself first to amplify your future well-being.
Manyike says the first rule of building a stable future that will take you through the various stages of your life in comfort and style is to decide what you want your money to do for you.
“Answering this question will help guide every financial planning decision you make. For instance, if you decide that you want to retire early, this will shape your investment strategy,” he says.
Manyike recommends you take these steps to amplify your financial future:
- Establish exactly how much money is coming in and out every month
- Work out a plan and a budget that includes setting funds aside for saving and investing
- Control spending so you don’t spend more than you earn. An overdraft and buying on credit may help raise your lifestyle but they are very costly
- Set up debit orders for your fixed monthly expenses as well as your savings and investment accounts
- Save for unexpected short-term emergencies as well as retirement
- Invest in insurance: life insurance as well as risk cover. Unexpected curveballs are a part of life and being insured helps protect you and your loved ones from financial setbacks
- Guard against making hasty and costly financial decisions in response to volatile markets. Stick to your financial plan and check your investments at set times
- Speak to a certified financial adviser about balancing your investment portfolio so that if the value of some investments dip, others will compensate for this. Avoid having all your assets in one basket. Diversity is key
- Create a “life file” which lists all your accounts, investments, passwords and people to contact about financial and personal affairs
- Get advice on drawing up a will, funeral and other insurance
“There is no doubt that a professional adviser will help to ensure that all the essential elements of a financial plan are covered.
PERSONAL FINANCE