As we traverse through life, whether we like it or not we need to deal with money and the consequences of our financial decisions. Each stage of life has unique challenges and researchers have found commonality in the issues faced by investors.
20’s: Playing it too safe: You are young, the rest of your life lies before you. Time is not a factor and any investments made should be equity dominated as volatility is not a major factor. Studies have shown that investors in their 20’s make conservative investment choices, mainly out of fear and ignorance.
30’s: Overwhelmed by Complexity: Life happens and in your 30’s your life is a tad more complex. There are kids to think of, a home loan payment due at the end of each month and that “credit card” debt! You have more money at your disposal than in your 20’s, but where do you efficiently apply these funds is the $1m question! Tax becomes a material factor in your life. The range of investment products and options are just too complex for most people to deal with. Very few people seek or are willing to pay for quality advice.
40’s: Misjudging Big Expenses: In your 40’s you are well down your chosen career path and need to make some far-reaching decisions regarding retirement and wealth accumulation. A common mistake is to over capitalize on your home as opposed to early pay down of your home loan. Many 40 somethings have living parents who they need to support, as well as young adult children who are still on their payroll. This has led to this generation being called the “sandwich generation”. Caught between a rock and a hard place, very few folk have a financial strategy and stick with it.
50’s: The Difficulty of Playing Catch Up: Retirement and ageing now become a stark reality that is not just something that is going to happen way down the line! You realise that you may live far longer than what you anticipated and your retirement funds may need to last up to 40 years. This difficulty is compounded by lifestyle creep, i.e. living beyond your means and keeping up with the Jones’s. Denial or blind panic often face investors, with sometimes catastrophic consequences.
60’s and Beyond: Not Delegating: Warren Buffet may well be managing Berkshire Hathaway well into his 80’s, but that is not the norm. Your personal balance sheet is more complicated, legislative and tax changes all have their effect, and often your analytical abilities battle to keep up. Most people overestimate their abilities and fear losing control.
Each decade has challenges and issues of its own, yet there is a common theme running through it all. The importance of getting appropriate wealth and financial advice should never be underestimated. By this we do not mean just any advice, but advice from a professional and suitably qualified person, team or firm that has your best interests at heart. These advisors should first seek to fully understand your stage of life and the issues you are dealing with, not just attempt to sell you a product. Then you should be mature enough to listen to the advice and apply it for the benefit of your and your family’s long term financial wellbeing.
Regardless of the decade of life within which you find yourself, get in touch with one of our Activ8 Wealth Advisors for a “no obligation” discussion regarding your financial position.
