In our early 20s the idea of any kind of financial planning is perhaps something for the few rather than the many. In our later 20s we might just about start to understand the concept and pensions through work are starting to be something we appreciate and not ignore.
When we hit 30, we are often torn between focusing on maintaining a young lifestyle, we may be looking at fitness a lot more to remain healthy but we might also start thinking about money and the future. What happens most of the time is we consider financial planning when we have to and not as a matter of course, why would we?
We feel young and we certainly don’t want to think about getting old. The problem is, leaving the financial stuff until we are in our 40s and 50s really thins out our options. The key is to face up to getting old before we get old and start planning as early as we can.
Below is a little look at a few major financial products that 40 somethings would do well to look at but 30 somethings could be really ahead of the pack by getting on this early.
Funerals. OK so this is really starting with the scariest one! We are all going to die at some point, it is the one and only truly guaranteed thing in any of our lives. It certainly isn’t something we should dwell on, but planning for it is a really good thing. A funeral plan is a very handy little financial product that means you can pay for your funeral up front so when you do pass away your family do not have to deal with the money side of things.
The other angle here is that you plan it all out, so they don’t even have to sort any of the arrangements either. They will be grieving, and they don’t need to be sorting out all the organisational and financial side of things too. Buying a funeral plan can be pretty daunting but the governing body called the Funeral Planning Authority have loads of info as well as a big list of approved providers you can trust.
If you own a property you will already have some kind of policy in place to cover the mortgage, but it is worth looking into this in more detail and get something that suits you and (if you have one) your family.
Once again, dying is not something we like to think about but take a moment to consider leaving all your debt to your loved ones…
Or if you earn money for your family, consider how they would function without that.
The premiums are never really something you get back, it is money put into a pot you will never enjoy, but it is really important for those you leave behind should the worst happen. There is some really useful info here https://www.moneyadviceservice.org.uk/en/articles/life-insurance-choosing-the-right-policy-and-cover
While it is now law for businesses to offer workplace pensions, not everyone accepts this and the ever-growing number of people working for themselves do not have this opportunity at all. As with most of these financial products, we do not like to think about getting old or retirement. In our 30s we may be earning more money than we ever have. But that is the perfect time to boost your retirement planning.
Consider for a moment the idea of retiring and having to live on a 10th of your current salary. It would knock your lifestyle sideways, holidays would be gone, shopping habits change, utility bills would become and challenge and more.
Consider a different scenario; how about retiring and having the equivalent of a nice salary coming in every month. The second one is much nicer!
It may not match your full-time wage, but a solid amount of money each month will make the difference between a tough retirement and a pleasurable one. Of course, there is a state pension, but this is not something to rely on, different governments may change this and it may end up being small or coming in far later than the age you want to retire.
The same can be said for private pensions of course. They are not 100% guaranteed and as such should be chosen with advice for the least possible risk while balancing a good yield.
Your home may well be your biggest asset later in life and that of any children and family. There are different ways to approach this. If you feel you would like a bigger home your later 30s are the best time to go for it. Your earnings are likely to be higher so you can handle the added payments as well as the credit checks.
That being said, you may have been in your home for a while now and built up some equity. Sitting tight and going for a mortgage free lifestyle in retirement could really ease the pressure on whatever provisions you have. You may also want to look at re-mortgaging to lower the payments and put the extra money into savings instead.
Never under estimate the good old savings account. While interest rates in the UK are pretty terrible at the moment, the money is safe and it will only grow. Getting into a habit of saving every month is really important. While the money you build up won’t last you through retirement in the same way a pension will, it may be enough to help buy that smaller retirement dream home with lower overheads. It may be helpful in a number of ways and it is really important to start building this up.
Sometimes you can’t do it all, but when it comes to financial planning you often can. You can make an effort to save, you can put something into a pension or up your contributions, you can get good life cover or pay for a funeral plan and more. You can then look ahead feeling positive, even if it feels a bit depressing!