Working out your future financial fitness
Make sure you have enough to cover life goals by planning ahead, writes Sinead Ryan
How we manage our finances throughout our life can sometimes seem hit and miss. But research from the Competition and Consumer Protection Commission (CCPC) has shown there are distinctive life stages which can be stepping stones as we navigate life's pressures. I've looked at these to recommend what we should be doing to ensure our future financial fitness.
Defining a path
Young adults (18-25) are mostly single, without children and renting. They may be studying or just embarking on their careers.
"Early decision makers are not long-term thinkers but are making important financial decisions, e.g. buying a car, opening current accounts. They may place a disproportionate value on opinions of family and friends instead of professional financial advisers", says the research.
You're also accessing credit for the first time and 'adulting' on insurances, utilities, accommodation. l What you should do: Set up some savings plans. We live to our means, so spending all your early income means you don't get used to living with less. Keeping a clean credit record is essential. Keeping a lid on debt is important if you're planning on a mortgage. Any defaults or black marks now act against you later, says MoneyWhizz expert Frank Conway.
Re-defining goals From your late 20s and into your 30s priorities may change: marriage, children and a house can become a priority. Mortgage applications are affected by earlier credit and savings decisions.
"Becoming more financially independent and having surplus income, you're beginning to think about larger purchases; this group is defined by an increasingly professional approach to financial decision-making", says the CCPC.
l What you should do: Bedding down your career, putting by as much as you can and considering a pension plans. Getting a mortgage means a hefty deposit and high repayments, so budgeting, rather than spending, is vital. Protecting your life and health with insurance once kids come along is important.
Age of Growth
In your 40s, you know more about personal finance and tend to get professional advice, says the study.
Factors such as attractive interest rates, future financial needs and lower charges are all important.
"Over a third are more inclined to switch insurances than their younger counterparts", the CCPC adds.
l What you should do: Investing. You have serious challenges ahead - college education, retirement and this is probably the peak of your career. It's also the time to invest in hobbies and interests which will be valuable when the kids fly the coop Maybe the golf subscription isn't a bad idea!
"Most consumers in this phase consider they have a very good knowledge of personal finance, and a significant number seek financial advice now - those that do felt that it was useful. The influence of family and friends in making these determinations continues to decline. This group is now beginning to pay off earlier debts", the CCPC says.
l What you should do: Paying down debt is a priority here - you may be coming to the end of a mortgage and college fees are over - consider how you will utilise this money and get annual pension advice from a trusted adviser.
Look at lowering household bills - you may not need all that life insurance any more, for instance; you can begin to cut back, and 'life style' your savings and investments by moving them into safer assets.