Life produces circumstances for which we all absolutely need financial provision. Some of these include education and retirement. Unfortunately not many people have sufficient money to cater for everything at once. So the only way to handle these competing needs is to prioritise them in order of importance.
Prioritise your needs
Prioritising can be a complicated juggling act. To ensure you are able to reach your financial goals it is important to protect yourself against unexpected events such as an accident or loss of income. Another need high on the priority list is saving for your retirement so that you don’t become a financial burden to your family and friends.
Tip: If you can’t decide on which needs warrant top priority, compare the consequences that will occur if you don’t meet each need. It’s a good idea to make a list of your needs and discuss the best approach with a financial advisor.
Prioritise retirement saving above education saving
Although for many parents it’s hard to accept, the reality is that retirement saving should have a higher priority than education saving. Your kids can borrow money for their education but you will not be able to borrow money for your retirement. Many parents say that education comes first and that they are willing to sacrifice and have a lower standard of living at retirement in order to give their children the best tertiary education. But the harsh reality is that if you can’t support yourself during retirement you will have to turn to your children for financial help for the rest of your life. This could put both of you in a difficult and compromising position.
Tip: It may feel selfish to put yourself first, but it is the best strategy for your family overall.
Save for long-term goals now
Don’t make the mistake of thinking that because goals such as retirement and education funding are long-term, you can get to them later. These goals require a big chunk of your finances so the more time you have to save for long-term goals the smaller the monthly contributions need be, making it easier to fit into your budget.
Tip: Even if you start small, just start!
Protection needs should be a priority
Sufficient cover (accident, disability or death) is a financial resource that protects you and your family from potential financial disaster if you are no longer able to work. You can’t control when you might need the financial support. Whereas with other needs you know when you will require the finances. You know when you will need to send your child to varsity, but disability or tragedy can strike at any time and you want the peace-of-mind of knowing that your family will be taken care of in such an event.
Tip: Your ability to earn an income is your greatest asset so ensure it is sufficiently covered.
Now that you know what needs should come first, you can compare, evaluate and prioritise all your needs to ensure that you address them in the right order.
Sanlam Life Insurance Limited is a licensed Financial Services Provider.