Over-Thinking Finances & Its Impact

How many people do we know who have been waiting for years and years before getting serious about their financial planning?
I’m talking about the so-called ‘Big Ticket Items’, such as property, retirement, children etc.

“I don’t have enough money to save” seems to be the most popular reply when asked about these items. So, it gets postponed to ‘next month’ and this goes on for years on end. Little do they realize that the more money they earn, the more they spend, forgetting to put more money aside. Savings won’t appear by itself unless specifically organized.It also seems that we are procrastinating due to the impression that we never have time in our daily agendas for financial planning. Perhaps most of us don’t totally understand the concept of saving or don’t really know how to tackle large investment goals or projects. And let’s not forget the ever-popular fact that many of us believe that we still have ‘many years ahead’ to plan all of this.

Even though there are no immediate numbers available here in South Africa, if we believe what the data tell us across the Atlantic, the latest American studies show that nearly 44% of Americans have less than R80,000 in their retirement accounts and almost 30% don’t even have R8,000 saved.

Financial planning should not be regarded as set in stone. Any of us can do but their best in estimating (guestimating?) what they project for the future. And so should their savings plan towards it be as well. Any action is better than 100x planning. Heck, just take 5% of your monthly paycheck and put it aside in a savings account. Without planning what to invest it in is even a major step in the right direction. If you then finally do have time to sit down with your financial consultant, who knows, after a few years, at least you can already say you have started saving!

How’s this for an example to show the power of time: say Vanessa started saving at age 45 old (probably because in her 20’s all her money went to her grooming, in her 30’s, all of it went to the children). Then you have Piet who started saving at the age of 25. Each of them saved R5,000 per year, with an average of 7% annual rate of return until the age of 65. Vanessa will have saved R200,000 while Piet will have crossed the R1,000,000 mark! Piet nearly has five times Vanessa’s savings!

The difference in these saving amounts was not due to failing to plan but due to failing to save. Every month, every year of delaying action is costing you money down the line. The time is now.

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