As our needs change over time so, too, should our financial plans. w&h’s Angelique Ruzicka gets expert advice on how to tackle this…
It’s no secret that the gender-pay gap has women on the back foot. Couple that with the fact that studies show we tend to live longer than men – so retirement funds must stretch further – and the message becomes clear: we need to be savvy with our cash!
We earn less but need our money to cover us for much longer than our male counterparts, which is why it’s so crucial to set up a sound financial plan. The buck doesn’t stop there – as our needs change over time (anything from marriage to motherhood and retirement), our financial plan must adapt. Danelle van Heerde, head of advice processes and tools at Sanlam, one of the largest financial services groups in SA, offers great insights…
In your 20s & 30s
When you’re financially unencumbered by kids, maximise on savings. “Put 10 to 15% of your salary into a retirement fund or annuity,” says Danelle. It’s also a good time to start putting cash into a separate savings account, building a ‘nest egg’ for life’s unexpected emergencies. “For this, aim to have the equivalent of three to six months’ income tucked away.” You may even decide to use some of these funds for a deposit on a home later on. Either way, it’s a really good safety net to have.
Cover for medical expenses and disability are wise investments, too. “A hospital plan is good enough at this point, and additional disability cover is crucial when you are the sole source of your monthly income,” adds Danelle.
In your 40s & 50s
Review the financial products you set up in your 20s and 30s with your financial adviser. There’s constant development, with benefits improving, so make sure your products aren’t outdated and are still performing well, advises Danelle.
Climbing the corporate ladder? Make sure you’re accessing the benefits – like retirement-fund contributions or medical aid – that come with promotions. And keep tucking a portion of any new pay rises into a savings or retirement fund. You won’t miss cash that you never had.
Home loans and kids may be part of your reality now, too. Pay more into your bond to reduce the loan term quicker. “Even paying just R100 more than you should each month helps,” says Danelle. When you become a mother, financial products, like education savings for your child and life cover for you, should be top of mind. Also ask a financial adviser to help draft a will, appoint guardians, and set out an estate plan, she adds.
60s & beyond
A financial adviser can help you prepare a retirement plan, pointing out which financial products to invest in to provide an income from your saved funds, says Danelle. Products like investment-linked annuities offer you more flexibility by allowing you to adjust your income every year and change your underlying funds. On the other hand, products such as guaranteed annuities don’t allow you to adjust your income, but guarantee your income will last as long as you live. Choose products that include annual increases to protect you against inflation.
Haven’t saved up as much as you’d like? Downscaling to a smaller home may help reduce monthly outgoings (like on electricity or garden maintenance), while taking on a part-time job (perhaps consulting from home) could help pad your income and keep you filled with a sense of purpose in ‘retirement’.