The challenges we face will change over the course of our lives.
In this section I provide a general overview of the issues that you may face in each stage of life. Later, I delve into the issues in more detail. There is something for everyone. You can read the entire section to develop a feel for my overall philosophy or choose the section or sections that are most relevant to your situation.
The plans you make today and the decisions you make as a result of those plans will shape your life in the future. And a big part of that future will be determined by your financial circumstances.
The planning process begins by creating your vision for the future, making some financial assumptions and calculating whether those goals are achievable. If they are not, adjustments to your plan will need to be made but caution has to be exercised when making those adjustments.
Investors can be tempted to make adjustments to factors they cannot control, such as the rate of return on investments or the rate of inflation.
Greater focus should be placed on factors that they can control, such as the amount to spend on a house, the amount to set aside for retirement each month, the age at which to retire and so on.
Once the adjustments have been made, the plan can be recalculated to ensure it is achievable.
A book that everyone should read, regardless of age or financial net worth, is Money Rules by Gail Vaz-Oxlade. It is full of solid advice and the author provides you with simple rules that can help you make sound investment decisions.
No matter where you are in your life, it is worthwhile examining what your priorities may be in order to develop an approach that ensures you are successful.
As these priorities change over time, so does the task of managing your finances. While the long term goal of everyone may be to accumulate enough capital for retirement, there are a variety of short term needs that need to be addressed throughout life. The result is a savings program that is not a straight line process.
Regardless of where you are in your life, the key to the successful management of personal financial matters is to keep the various commitments in proper balance. It might look something like this:
It is all about knowing your limits and setting guidelines. These guidelines don’t have to be hard and fast rules from which you cannot deviate even marginally. Rather, they should serve to provide you with some general direction.
Because everyone has different earning power, different debt levels and different aspirations for both the present and the future, there is no single answer that can be applied.
There are those who don’t want to compromise the present to fully fund their retirement portfolios. It is easy to do because the repercussions aren’t immediately obvious. However, our government is putting policies in place that will make individuals more responsible for their own retirement, rather than taxing the rest of the population and future generations.
It is worthwhile to examine how some of these priorities may appear at various stage of your life. Each of them will be discussed in more detail.
NEXT: Life Map