35 to 55 Years – Securing Your Financial Future
For most people, this is often where you have the greatest earning potential. At the same time, you also have a lot of demands competing for your money such as mortgage, children, vehicles, travel, school fees, and more.
The team at Compass Financial Solutions can help you get your finances organised while helping you to create and protect your wealth.
During this part of your life, the main focus is on creating and protecting your wealth.
Wealth creation – some people jump to the concept, yet for others, the thought alone can start your head spinning, or worse, your stomach. Rest assured, no matter what your tolerance is for risk or you aptitude for financial matters, there is a solution for you.
The earlier you start saving and investing the better. This is because of the impact that time and compounding have on your money. Interest accumulated over time through shares and managed funds will be earned on the original money you invested, plus additional investments, plus all the interest previously accumulated. Also, the sooner you begin to save, the more experienced and attuned you will become to the activity.
Regular investing is a particularly effective and convenient way to help you reach your financial goals. Even a little money invested regularly can grow into a tidy sum over time.
Always maximise the return on the money you do have by opening higher interest earning savings, cash management account, or term deposit accounts or invest it wisely.
Protect what you have
Savings plans, superannuation, property, direct shares and managed funds are all tools that help create wealth and achieve financial goals, especially for retirement.
It is very important that you protect your wealth and your family both now and in the future. This is normally achieved through the use of various life insurance products. Your adviser will assist you with the most appropriate type and level of protection you require.
Define your goals and your financial needs on a regular basis – things change and so can your priorities. Know and understand your own risk tolerance. Set a time frame for each of your goals. Seek advice from a qualified financial adviser. Be realistic. Balance your savings and investment strategy with your goals, time frame and risk tolerance. For those who are between the ages of 35-55, your financial plan should include a plan for your retirement and it should be a high priority.
Insurance – Do you need any?
Insurance becomes an issue for all of us once we have ‘things’ such as an investment portfolio, debt, mortgage, children or anyone else who is financially dependent upon you, financial obligations and living costs that can only be met by your income and therefore your ability to work.
Who needs insurance advice (also known as “risk advice”)? And when?
- Upon marriage or divorce
- Purchase of a home or investment property
- Borrowing to invest or as your savings and investments grow
- Debt levels change
- Starting or growing your family
- Anyone with extended families from mutiple marriages
- Change of job or level of income
- Entering a tradesperson career
- Starting or selling your own business
Income protection, also known as disability insurance, will replace up to 75% of your income for either a specified period of time or until you reach age 65, depending on the policy you choose.
If you become seriously ill or have an accident that prevents you from working an extended period of time your income protection will help you to live and meet some, if not all of your financial commitments.
It will also help you to avoid using savings and investments for daily living if you have a policy that allows you to do this.
Life insurance provides a safety net for your dependents if you were to die. Life insurance not only helps supplement income and cover debt if a main breadwinner were to die, it helps provide a buffer during the grieving period as well as burial costs.
If kids, especially young children are involved, additional money may be needed for care, after school care, or help around the house.
Life insurance is invaluable for sole parents and people who have children with more than one partner.
It will give you and your loved ones comfort to know that they will be looked after if you were to die.
Total and Permanent Disability Insurance
Also, called simply TPD, this policy may often be taken out as an extra on your life insurance. The most usual purpose of TPD is to provide a lump sum payment if one is to suffer from some type of accident or illness that leaves them unable to continue in their usual occupation, or permanently disabled for purposes of working in that occupation.
Trauma insurance offers financial protection in the event of a serious illness or disability and depending on the policy, a full or partial payment may be made upon death. Generally, they are used to ensure that living expenses, as well as recovery care, is provided for in the event of a major illness or disability. These policies have become increasingly popular as medical advances have become so successful in saving people who suffer major illnesses and accidents.
Trauma insurance is often bundled with a life insurance policy but may be taken as stand-alone cover. Some companies also offer protection for children.
Business insurance, incorporated through life, trauma and income protection insurance, is a vital safety net for anyone operating his or her own business, or in partnership in a business. It should be a strategy that protects the business, your income and your personal assets from being lost while the main income producer of the business is away due to ingury or illness.
It is important that the structure including ownership and beneficiaries, of the policies be organized correctly in consideration of the operational issues of the business.
What is a budget?
A budget is one of the best and most practical tools to help you manage your finances and unburden your life so that you can achieve things that are really important to you!
Who needs a budget?
Anyone with limited income. Anyone with debt. Anyone with goals or dreams that will require money. Anyone with plans for a large purchase. Anyone who wants to make the best use of their money. Anyone wanting to fund higher education or a child’s education. Anyone planning for retirement.
A budget will….
Identify surplus money that can be used to achieve your goals. Identify excess or superfluous spending that is preventing you from achieving your goals. Identify your spending priorities. And Increase your understanding and power over your money.
When to start or update your budget
Everyone can benefit from a budget. And reviewing your budget regularly, at least annually, will help to keep your spending and savings on track, as well as keep you focused on your goals and dreams.
Busgets are particualrly useful when you are looking forward to milestones in life:
- A new job, or a pay rise
- Moving out on your own
- Starting a family
- Buying a home
- A large purchase, such as a car
- A child’s education
- Eliminating your debt
- Starting your own business
Regular investing is a particularly effective and convenient way to help you reach your financial goals. even a little money invested regularly can grow into a tidy sum over time.
The easiest way to save is through a regular investment plan. By investing an amount each month, you will be well on your way to developing substantial savings and this introduces you to the world of investing.
What is Estate Planning?
Estate planning is a way of ensuring that there are sufficient assets on your death
- to be distributed to the appropriate people;
- at the appropriate time, and
- in the most tax effective manner, as chosen by you.
It involves more than just having a Will. It involves all the assets you own or control.
Four key issues to be considered
There are four key issues that need to be considered during the estate planning process. They are as follows:
- The availability of assets on your death – your assets must be managed and preserved to ensure that there are sufficient assets available on your death to carry out your wishes.
- People – your assets should be distributed to the right people. It may not be wise to leave all your assets to a 15 year old child (without any conditions) or to an adult child with an imminent marriage breakdown.
- Timing – your assets should be distributed at the most appropriate time. The timing of an asset transfer can have significant tax effects, reducing the net amount of any distribution.
- Control – sometimes events happen that mean we lose the amount of control we previously had. These can include being overseas and unable to attend to your financial affairs or losing the ability to manage your own affairs as a result of an accident or illness. As part of the estate planning process, there are a number of arrangement that can be put in place to enable another person to make these decisions on your behalf. Such arrangement includes enduring powers of attorney, advance health directives and funeral plans.