Dear Future Me..Are You Making Financial Decisions The Future You Would Be Proud Of?

Coming across a website enabling people to write letters to their future selves got Paul Dodd thinking about the savvy financial decisions you can make for your future self at different stages of your life to ensure future financial security.

Make friends with your future self, you’ll make better decisions

It’s natural to consider your future self as a stranger, but who looks out for the financial future of people they don’t know? Nobody.

Eliminating the disconnection you feel towards the future can help you make better decisions now. And that includes financial decisions. In fact, making good financial choices now could be the most positive and impactful decision you take for your future self, enabling you to enjoy a secure and comfortable retirement full of abundance and choice.

But don’t take my word for it. This connection between seeing your senior ‘self’ and making better decisions has been proven by science!

In research reported in the Harvard Business Review, Professor Hal Hershfield discovered that exposing individuals to digitally mastered images of their future selves changes their spending and saving preferences. By becoming more connected to their future selves, they made better decisions for the future.

FutureMe is another way to become connected to the older you. It’s a fun website which allows you to send emails to your future self. Doing this will compel you to visualise and imagine your future and can be an effective catalyst for getting your financial affairs in order now to attain financial security when you are older and no longer earning.

Are you able to tell your future self that you’ve got all bases covered? Or are you embarrassed to admit that there are gaping holes in your financial planning which might make life difficult for the 60-something you?

Here are some of the most important financial commitments you should be making to your future self during each decade of your adult life.

Financial commitments for your 20s

• Learn to budget
• Live within your means – no unsecured debt
• Acquire an emergency fund
• Understand the basics of investing
• Set some long-term goals
• Start saving a percentage of your income each month to benefit from compound interest – the younger you are, the more ‘free money’ you can make from compound interest
• Diversify investments
• Invest for your age – you can afford to take higher risks with higher potential rewards because you have plenty of time to recuperate any shortfalls if the markets go against you
• Assign a higher proportion of your savings to equities.
• Make sure you are saving in a tax-efficient manner

Financial commitments for your 30s and 40s

• Continue saving a percentage of your income into a retirement fund
• Remain diversified but…
• As you get older, begin reducing asset allocation in equities to less risky assets such as bonds
• Ensure you have life insurance
• Take out critical illness cover
• Start an education fund (if you have children)
• Increase your emergency fund
• Make a will
• Consider tax-efficient savings options which reduce IHT liability

Financial commitments for your 50s

• Avoid taking big risks with investments by adjusting asset allocation in favour of minimal risk investments – fewer equities, more bonds
• Consider income generation via dividend paying shares
• Ensure your portfolio is structured to minimise IHT liability to maximise the value of the estate your loved ones will receive
• Review projected pension and state benefits to compare likely retirement income to expected expenditure
• Set a goal of when you wish to retire
• Assess if there is a shortfall in retirement income and adjust your financial plan accordingly

Whatever your age, working with a qualified financial adviser is a great gift to your future self. A professional will help you get the best out of your investments with cash flow modelling software. Choose someone with experience in advising expatriates just like you to guarantee a stress-free and fulfilling retirement.

6 Steps To Planning Your Family’s Financial Future

Every individual and family’s circumstances differ, but diligent financial planning is the only way to ensure a promising financial future. The steps below should serve as a sufficient guideline for reaching your financial goals.

1. Set Clear Financial Goals

Achieving financial security can only be accomplished if you have specific goals in mind to be able to structure an efficient strategy in place to reach them.

Ask yourself questions to establish your goals. For example:

• Where do you see yourself in 10 years?
• What lifestyle do you wish to live?
• When do you want to retire?
• What do you hope to offer your children?

The point of setting goals is to determine the estimated monthly cash flow you will require to reach them.

2. Organise Your Finances

Once you have your vision in place, it’s time to organise your current financial situation.

1. List every financial account you currently have, including savings accounts, checking accounts, brokerage accounts, credit cards, and retirement accounts. Determine the balance on each account, along with the relevant login information to access them.
2. List your debts. Organise them from smallest to largest and clarify your priorities.
3. Create both a digital filing system and a paper filing system. Use these systems to organise all your documents, financial statements, and records.
4. Organise your bank and credit card statements. Using the estimates of your expenses and income, create an itemised monthly budget and determine how you can save money optimally.

You may be surprised by how much relief you experience when all your finances are organised.

3. Pay Off Undesirable Debt

Undesirable debt sabotages your future finances substantially. Whether it’s excessive student loans, car loans, medical bills, or bad debt chokes eating away at your cash flow, paying bad debt off should be at the top of your to-do list. Even if you start by making the minimum payments and increase your payments with time, keep close tabs on your priorities and direct all residual money after covering your essential expenses toward paying off your debt.

The Debt Avalanche Method of paying off debt involves making minimum payments on all debt balances and using the remaining money to start paying off bills that have the highest interest rates.

Regardless of your strategy, you should make it your top priority to eliminate bad debt so you can focus on more important objectives, like retirement planning.

4. Invest In Valuable Insurance Products

Insurance is the best way to protect your family’s financial future and ensure your loved ones are financially secure when things go wrong.

One medical emergency is enough to jeopardise your financial future, and the only way to mitigate the consequences is by having adequate health insurance. Furthermore, long-term disability insurance should also be included in your personal budget, but, fortunately, it typically costs just a few dollars a month. Long-term disability insurance will ensure your financial position doesn’t shift drastically when tragedy strikes. Life insurance is something you should be thinking of from a young age. A good term life insurance for you and your partner, if they also generate income for the family, could provide your family and children with a bright financial future, regardless of the path your life takes. If you’re not sure what insurance is best suited for your financial situation, seek professional advice to ensure you explore the best options.

5. Plan For Your Estate

You don’t have a seven-figure net worth to plan your estate effectively. Everyone should have an estate plan, including a will, power of attorney, and a testament. You will do well consulting an estate planning attorney to plan your estate and configure which investments, such as mutual funds, will be best to cover future costs, as well as ensure future generations reap the benefits.

6. Partner With Professional Advisors

Although your own efforts are valuable, seeking professional help could go a long way to planning a surefire investment strategy. A good financial advisor will offer you financial education on how you can direct your annual income to efficient private retirement schemes, or any other scheme of your choice, to build up your retirement savings.

A competent team of financial experts will consist of an insurance advisor, a financial advisor, and a certified public accountant.

If you want to ensure that your future self will be happy with the financial decisions you make today, why not make a free no-obligation appointment to discuss your planning with one of our team across Asia? We’d love to hear from you.