What a time to be alive. Artificial intelligence is taking over life as we know it, while self-driving cars and crypto currencies are raising some interesting challenges. The world has sped up and the changes we are experiencing can be difficult to navigate. Work-life balance has become the new goalpost and going vegan is becoming the new normal. There is hope and change is happening.
Yet when it comes to our finances, the pressures seem to be piling up as well. I believe it is time to re-evaluate whether we are preparing for the future.
I find myself in the millennial generation, better known by the following characteristics defined by Sirazul Islam in a University of Rajshahi team paper:
“Nurtured and pampered by parents who didn’t want to make the mistakes of the previous generation, millennials are confident, ambitious, and achievement-oriented. They also have high expectations of their employers, tend to seek new challenges at work, and aren’t afraid to question authority.”
The question is, however, whether we are making the same mistakes as the generations before us when it comes to our finances? Personally, I am seeing this more often. According to Dynamic Signal, more than 33% of millennials in the US expect to retire between the ages of 65 and 69, while 23% think they will retire between 60 and 64. Twelve percent say they expect to work until they die.
Many of my peers and clients are young professionals and entrepreneurs, running multiple successful businesses, or working hard to climb the corporate ladder. They are tying the knot and starting families of their own, but many of them are not planning financially for any of the above.
A few things to remember:
- Retirement planning – I am meeting more and more 30-somethings who have not started saving for retirement at all. If you are not working for a company that offers a retirement fund benefit, ensure you are saving in your personal capacity by making use of a retirement annuity. (This can be beneficial even if you are contributing to a pension/provident fund). The annual tax deductibility of contributions is invaluable in any portfolio.
- Do you have sufficient risk cover in place? Risk cover refers to life-, disability- and severe illness cover. If you are getting married and starting a family, your new or expanding family is likely to become more financially dependent on you and it is imperative to ensure you and your family are taken care of.
- Do you have an updated will in place? Dying without a will, or if your valid will cannot be found after your death, will mean you die intestate and your estate will be wound up in terms of the Intestate Succession Act. This is to be avoided at all costs.
In such a case the Master of the High Court will nominate a person – not of your choice – to administer the estate and wind it up. This can be a long, drawn-out affair, incurring high costs for your estate, and the process may be subject to legal challenges. The bottom-line is, it is likely to leave your dependants and loved ones with much anxiety, uncertainty and financial stress and insecurity until your estate has been settled.
- Diversify your investment portfolio and ensure you are saving enough. Apart from retirement funds, it is important to ensure your investment portfolio is well diversified. Different investment vehicles have different roles in your portfolio. Tax-free investments, share portfolios and direct offshore investments all form part of the ideal portfolio. It is important to diversify in terms of asset classes, fund managers and to ensure you have the most tax-efficient portfolio in place.
Starting to plan earlier in life takes off a lot of financial pressure as time goes on. Millennials like to think they are very different to many of the generations that have come before them, but by failing to plan we may be more like the generations that preceded us than we’d like to admit.