23 May 2017

Retirement Planning Pitfalls - don't make these mistakes

Financial planning for retirement is pretty significant, given that decisions made are likely to be with you for the rest of your life - perhaps 30 years in retirement.
But there are some common mistakes and misconceptions which could cost you. Here's some of them...

1. Ignoring inflation - it's not very significant at the moment but the long term average in the region of 2.5% means that halfway through a typical retirement a fixed income will only be able to buy you two thirds of what it did at the beginning, and only half after 30 years.

2. Expecting to die young - most people seem to expect to die prematurely! In practice that runs the risk that you run out of money too soon.

3. Not expecting to die! - a Will is an important part of the planning process and avoids causing your family problems. If you are retiring you should certainly have an up to date Will. A Lasting Power of Attorney is also well worth considering.

4. Over-reacting to short term economic changes

Understandably I am often asked about the likely effect on investments of the latest economic or political news. Without wanting to appear blasé and unconcerned my normal response is "don't worry about it". You certainly don't want to sell all your investments to cash at the first sign of bad news, and usually the best thing to do is just sit tight.

2 May 2017

Managing Your Money is Easy!

I was looking back at the history of our family finances recently. At one stage in the 1980's when interest rates were 15% or more our mortgage payments took up 40% of our income.

And on another occasion the technology company I was working for told us not to come in the next day since they had run out of money and couldn't pay us!

But we coped by following four rules which are still valid for keeping anyone's finances on an even keel:

1. Spend less than your income
2. Keep a rainy day fund
3. Make regular savings for your future (especially a pension)
4. Insure against the things you can't afford to have happen

- if only that were taught in schools!

Once you have those habits you can start to improve your situation further by improving your savings, starting an investment, arranging things so that less tax is due, and so on.

The basics of managing money is easy!

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