“When it comes to tackling your financial goals, whatever they might be, there’s no time like the present”
Suze Orman
Whilst it might not be exactly what you want to hear, the much-touted phrase “there’s no time like the present” is absolutely true when it comes to saving and investing.
Despite knowing that we should be saving and contributing towards our future and our retirement, few of us start reviewing our options and financial responsibilities until our thirties.
So, want to know how you can you get a head start?
Read our top 5 financial recommendations below!
Adopt compound interest as your new best friend
“Compound Interest is proof of Gods existence”
Jeff Rich
Whilst we make no claims of a link between compound interest and the divine, it is what makes saving early in life a really interesting proposition:
If you started saving $300 a month today and continued saving the same amount for the next twenty years, you will have put away $72,000.
If this went into an account that earned you 5% interest each year, after twenty years you will have accumulated savings worth $124,989.
But suppose you want to delay saving, maybe hold off for another eight years because you’ll be earning more and can afford to save $500 a month.
With the increased premium, you’ll save $72,000 in twelve years and, with the same 5% rate of interest, your balance will be $90 015; a decent total, but still $35,000 less than if you started saving earlier.
This is how compound interest works and why saving for your retirement, investing in funds, or saving in a high-interest account, pays off as a long-term investment strategy. This is why starting to save early is our top financial recommendation.
Get prepared
“To be prepared is half the victory”
Miguel de Cervantes
As every Boy Scout knows, it always pays to be prepared.
None of us like to think we’ll be affected by illness in the prime of youth, but these misfortunes inevitably hit a small percentage of the population, with most people caught unawares.
Many will have, sensibly, secured themselves a life insurance policy to protect against the very worst happening. Few, however, will have thought about critical illness insurance and protection.
This is about more than just covering medical bills and loss of earnings from that heli-skiing accident; it is important financial support for sufferers of serious conditions like, for instance, breast or testicular cancer.
With modern medical practice, survival rates in young people are incredibly high. But, being without earnings can take its toll both financially and emotionally. Whilst Critical illness insurance protection can never remove the pain of treatment, it can be designed to ease financial strain by covering costs. It also provides a lump sum payment when you’re convalescing from treatment.
Every Little Helps
“Great things are done by a series of small things brought together”
Vincent Van Gogh
Making small changes in your spending patterns when you’re young can represent significant changes to your financial landscape when you are older. Take, for example, your morning coffee at $2.50:
- Average working days a year = 261
- Over 10 years = $6,525.0
- Had you invested it at 2% compounded annually = $7,144.69
OK, so maybe morning coffee is non-negotiable but, ask yourself, is there anything else in your life that you spend money regularly on that could be substituted or given up?
Can you swap out your weekly magazines and read online for a cheaper subscription, for example?
The message here is simple; small changes make a big difference over time!
Get the right rate
“An investment in knowledge pays the best interest”
Benjamin Franklin
In the same way saving early matters, getting the best return on your investments when you are younger also has a cumulative effect. The better the rate, the better the effects of compound interest!
This is why it’s worth formulating the questions you need answers to and spending time investigating the various options available to you:
- Does your bank offer you a regular savers rate?
- What are your current returns on your pension scheme?
- Are you benefitting from the tax-free saving options available to you?
Speak to your bank or financial adviser about your current returns and check they are the best on the market for your needs.
Know what you want
“If you don’t know what you want, you end up with a lot you don’t”
Chuck Palahniuk
Ok, knowing what you want for sure isn’t always possible in your thirties, but you can start to plan financially for what you think you might need in the future.
Whilst you may be a little vague on the details there are probably key factors you have already considered.
If you haven’t thought past tomorrow, here are some ideas to get you started:
- Do you want to own your home? If so, at what age?
- When would you like to retire?
- What is the minimum you can live on?
- Are your lifestyle expectations flexible?
- Do want kids? To what level do you see them being educated?
You don’t need to know your exact retirement age, or how many hypothetical children you want. However it is important to think about how you’d like life to look and feel in the future.
To project the best version of life for the future you, begin by asking yourself what matters most. This might include; a house, a family, a particular car, early retirement, or perhaps that ultimate trip around the world?
Each person has different priorities and motivations, and it’s worth taking the time to reflect on what this looks like for you. It will help you select the best options and direction for you.
If you would like to work out your future objectives and create financial goals, or plan how to achieve your financial objectives, contact us for an informal chat.
