The question, from Catia, 28 from London
I'm now in my late 20's looking to create some sort of financial security plan so later on in life I am able to have a great deal of money saved for my pension , but also at this moment in time I am looking to have some spare money to put towards a mortgage and a house. I would like more information on buying and selling shares. Is this an adviseble route?
The answer, from Christopher G M Wicks CFPTM, Bridgewater Financial Services Limited
The starting point for any financial plan is to take stock of how much you spend. You need to make a note of everything that you spend your money on. Based on this you will be able to work out roughly what net income you need in order to provide yourself with a comfortable standard of living in retirement. This exercise may also reveal areas where you can achieve savings, for example motor and household insurance and utility bills. These savings can be applied towards debt reduction, savings or simply towards your current lifestyle. It your choice.
Once you have done this you can calculate the level of funding which you need to undertake in order to build up a large enough fund to supply you with the income you need. This needs to take into account any existing savings which have not already been allocated to other financial planning goals, such as house purchase.
You actually have two main goals at the moment. You need to build up a deposit so that you can buy yourself a home and you need to accumulate sufficient funds to support you when you no longer work. You need to strike a balance between the two. In practice, it depends on your priorities. If you badly want to own your own home, this needs to be prioritised until you have achieved it. However, you should bear in mind that the longer you delay funding for retirement, the greater the percentage of your earnings you will have to allocate. In an ideal world you should try to tackle both with savings into a cash deposit towards your mortgage deposit and longer term regular investments to fund retirement.
When it comes to retirement investment, rather than try to buy individual shares, which is very risky, it would be better for you if you used broadly based funds to enable you to buy the entire market rather than just a few companies’ shares. This will provide you with a better spread of risk.
If this all seems a bit daunting, you don’t need to worry because it is all in a days work for most professional financial planners who can guide you through the process, help you work out what you need to save and advise you on where to invest. They can help you put your financial affairs in order and enable you to keep them that way through regular reviews.
Christopher G M Wicks CFPTM
Bridgewater Financial Services Limited