By: Darren Brown
I have seen a grievous evil under the sun: wealth hoarded to the harm of its owners, or wealth lost through some misfortune, so that when they have children there is nothing left for them to inherit. Ecclesiastes 5:13-14
It is often said that money doesn’t really age. So it is never too late to start making wise financial decisions. However, I firmly believe there are certain times in your life that are ripe for deliberate money moves that will see you setting the foundation for your future success.
Here are some suggested financial moves to make by decade.
In your 20s: Lay a foundation
At this stage, people generally enter and exit universities, colleges, or training institutions, transitioning from 20s and cross the bridge into their 30s with a moderate career history, albeit just starting to make a name. It’s important to note that you have time to recover from any bad decisions, but the reverse is also true; any unwise habits formed that is not unlearned will generally follow you.
According to Ted Schumann II, managing partner of independent registered investment advisory firm The DBS Companies, “This is the best time to make saving money a priority and the best time to avoid some pitfalls like getting into a lot of credit card debt.”.
It’s suggested that there’s one way to do both, and that’s by creating a reasonable budget that aligns with your priorities and includes at least some allocation towards savings, no matter how small, and allocating some funds, preferably into an employer retirement plan that matches your contributions. If not, open an individual retirement account.
In your 30s: Hit your savings goals
This is arguably your best investing years, so you are encouraged to use them wisely.
While in your 20s, you might have been struggling to get things together. In your 30s, it’s time to get focused. The goal: saving 15% of your income for retirement.
The first two decades of “adulthood” are so important because they are the single biggest asset you have when it comes to growing your money (aside, of course, from money itself). Investing early gives your money time to grow through compound interest.
This is also when you might find yourself juggling other goals. That budgeting habit you formed in your 20s will pay off. A budget based on your values will help you prioritise when financial goals and responsibilities start to pile up.
“Early on, you’re taking time to think through what is more or less important,” says Stuart Ritter, a senior financial planner with brokerage firm T. Rowe Price. “Maybe you’re saving for a big house but you’ll drive an older car, or you want to take vacations but you’re OK living in a smaller house.”
In your 40s: Take stock of where you stand
This is where you draw a line in the sand and reflect on how consistent your savings have been over the better part of two decades. You might realise that you have a sizeable bank account. If you haven’t yet figured out how far that money will get you in retirement, now’s the time to do so. Speak with a financial advisor, or you can utilise the online retirement calculator option to get an idea of your savings progress if you are on track or you missed the mark. You might also realise that you could shift extra money to other goals, like college funding for your children or giving more to church initiatives benefiting compassionate ministries.
In your 50s: Catch up while you can
Take advantage of tax relief by putting more funds into pension plans. To encourage pension schemes, the government provides tax relief on contributions made to pension schemes and the growth in their investments. Pension plans count as tax relief items, and therefore the money you contribute to a pension plan is free from taxes. That means the wealth you have accumulated in your plan is entirely your own. These benefits extend further when you reach retirement age.
In your 60s: Shift your focus
Many Jamaicans retire in their 60s. Unfortunately, some don’t have that choice because the foundation was not set earlier. At this stage, concrete plans are made. What was once a very unclear goal starts to come into sharp focus. When will you stop working? Do you plan to quit altogether or shift to part-time work? Many retirement experts say your mental and financial well-being will benefit from the latter, if your health allows it.
Additionally, you’ll also want to make an income plan for retirement, figuring out how much money you’ll receive from your pension plan and how much you need to meet day-to-day expenses.
Let’s take the time to continuously examine our financial journey through the decades and make the necessary adjustments that will allow us to be better prepared financially.
Proverbs 21:5 – The plans of the diligent lead to profit as surely as haste leads to poverty.
Additional information from Arielle O’Shea, Personal Finance Coach