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Do you make wishes or plans?
By Jill Kerby, Personal Finance Journalist
‘Don’t forget to make a wish’ we say, as children blow out the candles on their birthday cake year after year.
As a child I wished for a cat, despite the fact my Dad was allergic. I wished for blonde hair like my Mother and sister, and to be an opera singer like my Great Aunt Alice.
Alice ended up marrying a millionaire admirer but alas, no operatic voice or blonde hair ever arrived for me and I got my own cat when I moved into my first apartment.
As a grown up, we know simply wishing for something to happen, won’t make it so and if a child asks us to make a wish now, we don’t automatically say we want to fly or live on ice-cream. We’re more likely to pause and think about how we’d use that wish, so it’s not wasted.
That’s a good reaction and one we should try to adopt more, because taking the time to really think about what it is you’d like to have, is so important. Things like a university education, a new career, a bigger home or a career break don’t just happen. You need to make realistic plans and do something to make them possible.
It’s the same story with building personal wealth. Ideally, it starts with good money habits from an early age and leads to a job that allows you to save, invest and let the real magic - compound interest – do its thing to help grow your money. Kick that process off early enough and two of the most common wishes of young people and their parent’s - home ownership and early retirement - are genuinely possible.
No one wishes for ‘Haphazard ever after’
It’s important however, to understand the difference between genuine financial planning and sporadically buying financial products like life and income protection insurance, investment funds and pensions policies.
A haphazard approach to your finances can be counter-productive and without proper planning, there’s no guarantee they’ll provide the long-term benefits you need them to deliver.
Financial advice can help
With the help of a good financial advisor, you can look at your overall financial position, think about the bigger picture and consider the options around insurance, income protection, a pension and will.
A financial advisor can help you buy products with features and benefits that match your goals, ambitions and time frames. They can adjust it along the way too, as you reach key milestones and your priorities change.
Just like a trusted family doctor or solicitor, they can be a reliable source of information and advice as you move through life.
Inertia is the arch rival of wealth creation and financial planning isn’t everyone’s forte, but if you can’t commit enough time or attention to your finances, my advice is to get someone who can, or your money will never work as hard for you as you do for it.
There might be more exciting things you can think of doing, but once your insurance, pension or investments have been put in place, they’ll work away on their own for the most part and you can do the things you like most, safe in the knowledge that you and your loved ones will be well looked after, in the future.
The truth is, middle age creeps up on a person faster than they ever expect it to and with improved life expectancy putting pressure on state and corporate pensions that are already struggling, I believe a high percentage of the people reading this blog will be forced to fend for themselves by the time they reach retirement age.
For those of us who are close to, or have reached that landmark already, it’s a sobering thought, but one many of our young people are dismissing too easily. Leading management consultancy Mercer picked up on this a few years ago and reported that as many as seven out of 10 young people in Ireland choose not to join the occupational schemes offered by their employers, leaving millions of company pension contributions left on the table every year. That trend hasn’t improved unfortunately.Source: Mercer.ie Newsroom article 15 April 2014
If you’re offered a pension, grab it with both hands!
When you join a pension scheme, you usually have an opportunity to ask questions, so it’s worth finding out if your company provides access (or even good contacts) to financial advice or a broker service. That way you can talk to someone trustworthy and find out more about things like insurance and investing.
You don’t have to buy every financial product that’s put in front of you, but knowledge is power and with good information you’ll be able to make well-informed decisions that could benefit you for the rest of your life.
In my experience, the best financial advisors understand the need for flexible, affordable plans that grow with you, allow for a few bumps along the way and maybe even a little wishful thinking.