Financial planning tips for beginners Age group 35 to 45
The age band 35 to 45 years in a person’s life represents the most important part of anyone’s life. This is an age band where you are really growing in your career. This is an age band where growth is there in the family this is an age band. Where you lay the foundation for financial freedom in years ahead. This is also an age ban where people tend to do a lot of mistakes and if these mistakes become too much it may become very difficult for them to reach their life goals. By the time you achieve this age band you have already worked for 10 years between 25 to 35 years and you have already gained the experience. So in this article, we are going to discuss with you all the things you need to know in the financial planning space that can make your life a wonderful life to lead going forward.
Review of your last 10 years of life
Now you are in the age band of 35 to 45 years of life. this is the mature phase of your life. The first thing that you have to do at this age is sit down with your partner your life partner and do a review of what happened in the last 10 years. You would have started your career as a bachelor later on you would have got married maybe your children are also a part of your family by this. Time this review that you are going to do will tell a lot about what all the things that have happened in life you would have earned a lot of money you would have spent a lot of money you would have wasted a lot of money or you would have taken meaningful steps to build financial freedom going forward. This review tells you what you like what you don’t like and all the things you wanted to do but could not achieve. This throws a lot of insight into the approach that you have in life and if any corrections are required to do. Take out a diary and make a note of all these things so that you will not forget what you need to do going forward. So the review of your past 10 years is a must for you to attain financial freedom going forward.
Saving is a must now
So after review what is the next thing that you should do. the next thing that you have to do is take stock of your income and expenses. Now saving is not an option for you it’s a must whether you are able to save or not is not the question at all. You must save at this age. you may not be saving for various reasons, for example, you may be earning a smaller salary or you may be spending a lot of money you may be wasting a lot of money you could have taken a lot of credit card debt or some loans personal loan car loan, etc. Which might be the reason for you not to save in the last 10 years. Now that has to change the saving has to start in your life. Maybe you take up an extra job or maybe you change the job for a higher salary if your wife is not working think about the possibility of whether she can also earn and increase the family income. Maybe you have to reduce your expenses instead of buying a new car you could consider buying a second-hand car if you are staying in a very expensive property and if your rents are very high you could consider moving into another property that has lesser rent. So think about all the things that you could do which reduce expenses and which can increase your income. Thereby now a sustained effort has to be put in to increase your saving. If you are not able to do the saving or any planning you will not be able to do anything and everything you do can backfire on you.
Appoint a financial planner
Now let us look at one by one all the things that you should consider and what are the things that you should plan for. The first thing that you have to do is look out for a professional financial planner who can assist you if you have a financial planner the mistakes that might happen in your life are reduced. You can follow a process-driven approach toward financial freedom.
Revisit insurance needs
The next step that you have to do is to protect yourself and your family from the financial disaster. That might happen due to an untimely death or due to the incidence of critical illness for you or for your spouse. Now between the eight bands of 25 to 35, you would have taken a couple of insurances some people would have approached you are friends of you might be having an agency of an insurance company you would have taken some of the insurances. that’s fine, all that you have to do is review them just because you have a policy doesn’t mean that you have adequate insurance. When you sit with your financial planner he will be able to assist you to find out how much life insurance you need to have and how much of a critical illness cover you should be having. Now once you know how much life insurance and the critical illness cover that you should have now deducted from that the existing the whatever the planning that you have done and by the balance amount of cover you need. Make sure the policies that you buy cover at least till your retirement age if possible and if you can afford to take it up to 75 years of your age.
Revisit emergency needs
The next thing that you have to attend to in the financial planning in an orderly manner is to build an emergency fund. Now in your review of the past 10 years of your life, you would have noticed that you would have built some savings. You could have put some money in the fixed deposit, some money may be idling in some of your savings bank accounts some money may be there in the mutual fund account. Now, all that you have to do is if any of these monies are available in any of these accounts compartmentalize them properly. What I mean to say is to designate these accounts as your emergency fund. Once you designate this amount as your emergency fund you should not be using this money for unwanted things like buying a site or buying a vehicle or doing something else or going on vacation. So identify this amount and say this is the emergency fund that I have if the emergency fund that you have is not sufficient for you to sustain yourself all that you have to do is use the savings you have to build your emergency fund now.
Revisit the creation of retirement funds
The next thing that you should focus on is your retirement fund. If you have already started something towards retirement corpus building in the first 10 years of your career between 25 to 35 excellent fantastic. increase contributions to your retirement fund if you can afford it. If not at least continue with it. If you have not started a retirement fund in the last 10 years you should take it up on a war footing. the time is running out had you started this at the beginning of your career you would have had 30 to 35 years to build a retirement corpus. now you are hardly left with another 20 to 25 or maybe just 15 years for you to build the retirement corpus. The amount of money you should set aside to build your retirement corpus increases year after year if you do not start. This is a top priority in life unless you help yourself at this stage your retirement can be pathetic. It can run into problems after problems during your retirement years. Do not neglect it however small it may be but make a beginning you can add on as you go forward. The first thing you should do after doing your insurance and building an emergency fund is to make a beginning towards building a retirement compass.
Child Education Planning
The next thing that you have to focus on is your children’s education .your child would need a large amount of money by the time he or she starts college education. Then you need a really big amount of money when the child goes to her post-graduation studies. You need to be planning for this right from the beginning one of the things that you have to keep in mind when you plan for a child’s education is it’s a very very difficult thing to plan for children’s education. A lot of things are unknown in the child education space. For example, you do not know which course your child is going to pursue. Gone are the days when you wanted your child to be an engineer or a doctor or something like that. Today the children are pursued to follow a profession where they find their interests .so what interests your children will take up which courses they go for which country they will be studying nothing is known at this point of time. So it’s a lot of it is there the simple philosophy to follow in case of child education is more the money you can set aside it is better .so try making an honest attempt to put as much as possible for your child’s education. but that should not come with a compromise. You should not compromise the three steps I talked to you before insurance emergency fund and retirement nevertheless child education is a top priority at this stage.
The next thing that you should concentrate your focus is on a home for you to leave now many people are over attracted to properties at the beginning of the carrier itself they will go and buy a big property. But if you are living in some other part of the world or if you are living in another city in the same country you may not go and stay there It’s not practical to put a huge amount of money into buying a house so early. Before you buy a house make sure that you know exactly where you are going to go and live. You should know when are you going to go back and start to live in that particular house. Let’s say that you are going to go back after 20 years and start to live in that house it doesn’t make any sense for you to buy that property today and keep it idle and spend a lot of money paying taxes maintaining that property and other things, and in 20 years from now the fashion would have changed the areas would have changed you may want to live in a bigger property you may want to live in some other city or you may not go back and stay in India itself. so all possibilities exist so unless you have clarity about where you are going to go and live or when you are going to go and live in that house do not be in a hurry to buy a house. always prioritize the things that I have told you in the beginning and that should be the thing. Okay if you want to buy a house my simple suggestion for you would be compatible with one another savings part. Maybe a mutual fund may be a bank FD or anything start putting money into this compartment with the intention that when the time is suitable for you that is the time you use this money and buy that house. that appears to be a more prudent strategy than to go and buy blindly a property that you are not going to go and live in.
What next if you are that lucky person who is able to save so much money and you have attended to all the points that I have discussed before and if you are still left with a lot of savings this is the time for you to work on wealth building. you could buy that extra mutual funds you can buy that site you can buy or you can invest in real estate you can venture into some private equity or you can invest in a business a lot of possibilities exist .so if you have those extra savings that are the time you concentrate on wealth building activity. Do not neglect the point that I have told you in the beginning.