The Heart of the Matter
A new (timely) study from Sweden reveals that heart attacks are most likely to happen at 10PM on Christmas Eve, than on any other day of the year. The study analysed the timing of 283,000 heart attacks over 15 years, and states that the risk of having one rises by nearly 40 percent on the day before Christmas.
Many of life’s emergencies, as well as its greatest moments – marriage, children, career advancements, retirement – present a crucial opportunity to evaluate one’s financial condition.
A financial plan would assess your current financial situation by summarising personal goals and drawing up a plan that helps you navigate from the present to the financial future you want. A comprehensive financial plan will review one’s current savings, budgeting, insurance, investment, tax, estate planning and retirement status.
Whether you are planning for the arrival of your first child, or your last day of work, this article lays out a strategic path that leads to financial security, while bearing in mind that every individual has their own peculiar goals and priorities
Finding your why
When the Olusesi family gathers in Lagos on Christmas day to open gifts, there will be no handing over of parcels from Bode and Ibifuro Olusesi to their four grandchildren, who are in their early 20s and employed. Instead, the grandparents will be giving notes that say the grandchildren now have Retirement Savings Accounts worth N3,000,000 each.
Think of how large this compounded initial lump sum can become when the four young adults retire in 45 years.
The end of the year may represent a frenetic time, but building such deliberate financial moves into the remaining days of 2018 can pay off long-term, and provide greater peace of mind for the coming year.
Some of the following financial planning strategies also provide clarity for achieving financial security:
Review finances, define personal goals: Organise your financial affairs by taking stock of your assets and liabilities. Think about what you would like to save towards (children’s education, new home, car, family ceremonies, vacations, etc.), and consider how long and how much you will need to put aside in savings and investments in order to achieve that particular objective when the need arises. The biggest obstacle to an effective financial plan is debt.
Begin to budget: Go over your expenses for the past year so you can anticipate your future monthly spending. Staying within budget (and cutting back on impulsive spending) not only ensures that expenses are planned, but also helps achieve or surpass any savings goals.
Liquid cash reserves: Financial experts advise setting aside between 6 months and two years of living expenses in savings, for emergencies. The older you are and the higher your salary, the bigger your emergency fund should be. Once cash reserves are solid, the next natural step is to begin investing.
Investment portfolio: Set an asset allocation, and diversify based on your goals, objectives, and risk tolerance. Asset allocation is an investor’s most important decision, says William Bernstein, author of ‘The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between’.Research by numerous finance professors has shown that the vast majority of returns over time come from asset allocation rather than picking the right security or the right time to invest in the market. One rough rule of thumb Bernstein uses for setting a stock-bond allocation is that your age should equal your bond allocation. Asset allocation works best with occasional rebalancing, since not all assets move at the same rate or in the same direction
Insurance coverage: Ensuring you are adequately insured – life, health, disability, long-term care, and homeowner’s insurance – will help protect you and your loved ones from financial crisis.
Estate planning: Establishing a will, trust, and powers of attorney, and ensuring they reflect one’s current wishes and desires allows an individual decide exactly who will benefit from their estate, to what extent, and in an efficient manner (protection from taxes, for example).
Taking advantage of tax incentives: Whether as an employee or business owner, there are many tax incentives to be had. This can include anything from tax loss harvesting to offset company group liability (for businesses), to maximising pension fund contributions which lower annual income tax payable and serves as a tidy retirement nest egg (for employees).
Retirement: It may be ideal to start saving for retirement after the age of 28, but if that fails, there are plans for late starters or the self-employed. These can include Retirement Savings Accounts (RSAs), annuities, and insurance policies that guarantee returns before or at maturity of the policy or account.
Because your savings and investment decisions (both long- and short-term) should be as unique as your DNA, working with an experienced financial advisor becomes not just about accumulating wealth, but about accumulating wealth for very specific reasons, successfully.
People often underestimate the benefit of something as simple as being organised, but those who take the time to plan end up more confident and positive about their current and future finances.
*Disclosures: This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. ARM Investments (ARMI) advises investors to independently evaluate particular investments and strategies, and seek the advice of a financial advisor or wealth manager. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
*For financial or wealth management advice, please contact ARM Investment Managers: