As a young professional, retirement seems so far away. I’m busy trying to achieve the balance between work, study and a social life, so as to enjoy what many would call the ‘prime’ of my life. Women are living longer than men, are still getting paid less than men, and are more likely to have gaps in employment due to taking on ‘carer’ roles. Consequently, we as women, generally have less superannuation and other investments. So although my retirement may not be in my immediate future, the financial planner within urges me to plan – especially because I am female.
Everyone’s plan is different but the basics are the same.
At Income Solutions we believe the best investment you will ever make is in yourself. Further education offers you a great advantage over your colleagues. It can give you the confidence to apply for that promotion, or to request a pay rise and breach the gender pay gap. Whilst working full-time and studying is not an easy feat, once you have achieved a balance it is definitely worth it.
Develop a budget. I know budget sounds like a dirty word and no one wants to know how much they spend, but it is important. It is not about not spending money, it is just about knowing how much you do spend. It is one of the most important aspects of your plan. Many of the banks now have budgeting tools in-built with your internet banking and this is a great place to start. You can’t plan to invest in the future without knowing how much you spend.
Another vital part of your plan should be protection. People don’t question insuring their car or their house, but if you ask them if they have Income Protection they don’t understand why they need it. You are the money machine, and if you are not able to work and earn an income where is the money going to come from? Insurance is important. It is no longer your partners or parents responsibility to safeguard your future. You are an adult, and you need to take responsibility. Insurance is easily obtained and some of it can even be funded through your superannuation.
Now comes the fun part; planning. Think about your goals. Write them down. The best way to keep yourself accountable as you are progressing towards achieving your goals is to have them written down. My goals have always been to travel and I have been fortunate enough to see quite a bit of the world. The downside to this is that the list of places I still want to visit keeps getting longer. I know I am going to need to work hard and invest to have an income large enough to support this lifestyle. Family is also important to me and I would like to have one of my own one day. Due to this I know that I will fall into the same situation as many women who take breaks in their employment and work part time in order to raise a family.
One thing that is not on my list of goals is buying a house. Many of my friends and family cannot understand this. I hear the phrase from them ‘rent money is dead money’ all the time. This is not true. Interest is dead money. I know I can rent a nicer place than I can afford to buy and will not be paying interest to the bank to do so. I can invest the difference in what my rent is as compared to what mortgage repayments would be for the same house and build up my investments that way. One day in the future my investments will be able to fund my travelling adventures. My friends will own a house that is simply costing them money, not making them money. I know this strategy is not for everyone and if it is your goal to own a house it just should be planned for and structured the right way.
When you talk to young professionals about financial planning, the common theme is that it is too hard and they don’t have time to plan. It really isn’t that hard and a little bit of time invested now will pay dividends in the future.
Income Solutions have a variety of presentations – Income Solutions for Women, First Steps to Financial Success, Common Sense Investing, and Common Sense Estate Planning. If you want to find out more about us and how we can help you, head to our website and register for one of our free information sessions or simply book a free appointment. By the way, our coffee is so good it’s worth just popping in for that!
This post also appears as an article in the latest RUBY magazine.
Elise Ryan, Financial Planner
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