Why it’s important to start financial planning earlier in life!
As a client you already know about, and appreciate, the benefits of quality financial planning so that you can meet your goals and live your dreams. But for others that you know, perhaps younger family members, friends or colleagues, at what age do you think they should seriously consider financial planning?
Certainly when people are in their teens and 20’s, they have many other priorities and thinking about the state of their financial future is probably not high on their list. The latest thinking, probably not unsurprisingly, suggests that the earlier the process starts, the easier it is to achieve agreed financial goals. But if most people don’t even consider the ramifications of retirement and old age until well in their 40s or later, is this leaving it too late?
Will people be able to fund their lifestyle post retirement?
Recent media reports have been reporting that more than a quarter of children aged 16 will see their 100th birthdays. So if people are going to live to be 100 or more, it’s important that they start saving as early as possible because let’s face it, they will need it to fund their lifestyle post retirement.
Danny Cox, Head of Financial Planning at Hargreaves Lansdown said. “The two biggest factors that determine how much your pension will be at retirement are the amount you put in and the length of time you invest it for. The sooner you start saving into a pension the better, even if you are saving a small amount.”
Our advice would always be that having a plan makes it easier to achieve something later on in life. And whilst financial planning as a teenager is probably a little too much to ask for, we do recommend that people should be starting to think about having a plan (albeit not fully developed) from their 20’s onwards.
Develop good financial habits
Ok, we have established that people should start early, but what things should they be thinking about doing in your 20’s that will help them financially in their 30’s, 40’s, 50’s and beyond? Essentially it’s about developing good financial habits; some of these are as follows:
- Increase financial knowledge. Read the business sections of newspapers, financial magazines or personal finance books.
- Establish a good relationship with money by controlling emotions, greed, fear and excitement when making financial decisions
- Understand attitude to risk by working out what could be easily sacrificed in return for good returns
- Learn about budgets, budgeting and how to plan and have control over what comes in and what goes out – start to live within your means
- Understand the differences between short term debt (credit cards) and longer term debt (mortgages)
- Look at accumulating some savings. Saving as much as you can (ideally 10% of your earnings), without it adversely impacting quality of life
- Think about future large financial commitments, car, house, wedding and starting family and try to understand how to plan to achieve them
- Take up an employers offer to pay into a pension, there are good tax breaks and obvious benefits in years to come
Taking action now will have a huge impact in determining how people will live in their retirement years. So by planning and saving now, whilst still enjoying life and living within your means, is something that we heartily recommend.
If you know someone who might benefit from our financial planning in their 20’s, 30’s or 40’s, please pass on their details and we would be delighted to give them a call. Even if we’re not best positioned to help, we’ll certainly be able to guide them in the right direction.