Make the right choices for your money
Financial wellbeing is a daily exercise
Much of financial wellbeing begins with the choices that we make on a daily basis, from budgeting, putting money aside for an emergency, curbing unnecessary spending habits to the investment model you choose for your retirement investment.
A financial plan is always the first step you need to take when setting out your goals. Your financial plan will change at different stages of your life – it should not remain linear. Your needs will look different as you move through various phases of your life.
The younger years
Investors in their 20s will have at least 40 years to accumulate their retirement savings. In this stage of your life, aim to keep your savings invested in the most suitable investment vehicle for you.
Look for consistent long-term performance and keep your retirement savings invested between jobs to benefit from compound interest over the long term. During this stage, you will be focusing on planning for and creating your wealth.
Middle-age investors
People in this phase are starting to earn and spend more and are most likely attempting to pay off debt. Your investment objective could be moderately highrisk portfolios to keep your money protected. However, this is dependent on your risk profile and appetite. Because of higher earnings and possible tax savings, first try to top up your compulsory investments as much as possible before building on discretionary investments.
The retirement years
Retired investors want to minimise risk and keep up with inflation. Your main objective would be to choose an appropriate income annuity option (either a life annuity or living annuity) that would best suit your retirement income needs.
Take advantage of compound interest; consider selecting a healthy contribution rate of a minimum of 13% to 15% of your fund salary and investing in more aggressive investments or portfolios in your younger years. Two to five years before retirement, your focus now needs to shift towards protecting your savings that you have accumulated over the years.
Discretionary investing for rainy days
In any life stage, make sure you have enough emergency savings so that any unplanned and urgent expenses do not derail your long-term goals. Also look at making sure that your affairs are taken care of even in the event of death.