Act your age for a secure future

Everything — from bank accounts to savings accounts, investments, insurances and retirement planning — needs to be constantly monitored to ensure you have enough to support you during your working life and in retirement.

This should also help you avoid getting into debt. A staggering 106,645 people were declared insolvent during 2007, with almost 30,000 going down this route in the last three months of the year. In many cases such problems could have been avoided.

Andy Merricks of Brighton-based Sker­ritt Consultants insists it is vital to get a handle on your finances as early as you can. Every day you wait before sorting them out lessens your chance to build a decent nest egg for the future.

“There are two great risks in this life: one is dying too soon, the other is living too long,” he says. “If you can balance the two with the allocation of existing funds you will be in a better position.”

Twenties

You will be starting out in your career, so your salary is likely to be modest and it may be a struggle to make ends meet. As well as paying off university debts, for example, you could also be paying rent and bills before working out how to fund your social life.

It is understandable that putting money away for later in life is not a top priority, concedes savings expert Anna Bowes. But it should not be an excuse.

“It is imperative that people make a start with saving as early as possible in life,” she says. “These days we have to become financially responsible earlier — a lesson everyone needs to learn.”

Start to budget and, if you haven’t got a bank account, get one. Learning how to manage your income and not get into debt is the first step on the road to a less financially stressful life.

If your employer has an occupational pension scheme, join it because they will usually contribute as well. If not, consider starting a private pension.

Any spare money — however unlikely that may sound — should be put in an individual savings account (Isa), a tax-free savings wrapper that allows you to invest up to £7,200 in any tax year.

Thirties

The decade in which life starts becoming more serious. Your salary will have probably increased but so will demands on your wallet.

As well as trying to get on the prop­erty ladder — and realising how expensive bricks and mortar are — it is also the age at which people often settle down and start a family. “This is the stage of your working life when you need to start saving properly for retirement, whether via a pension or an Isa,” advi­ses Darius McDermott, managing director of Chel­sea Financial Services.

“The Govern­ment is not going to fund your retirement — if you want to enjoy any quality of life in the years to come you have no choice but to start making some provision.”

You should also look at ways to protect yourself. Life insurance normally comes on your radar screen when you take out a mortgage but it might be worth considering such policies as critical illness or income protection.

“Parents must consider how they would pay the mortgage and meet the other household bills if the main breadwinner died or suddenly fell ill,” says Bowes. “It is vitally important to consider the worst scenarios.”

If you have spare cash, also consider some investments. “Save as much as you can — even £50 a month is better than nothing,” adds McDermott.

“You want to give yourself 20 or 30 years for your pot of money to grow.”

Forties

You can have one eye on enjoying your money and one on putting enough aside for retirement. Many people’s earning power peaks in this decade, so put this new-found wealth to good use.

With a decent salary and fewer expenses, it is worth paying off as much of your mortgage as possible. In addition, channel spare cash into your existing pension and Isas, as well as any other existing investments.

Malcolm Cuthbert, managing director of financial planning at stockbroker Killik & Co, suggests it is the ideal age to take stock.

“When people get into their mid-­forties they will start thinking about pensions and consider contributions, transfers and consolidating their assets,” he says. “They will need to work out how much they need — and how much they’ve already got.”

With the best part of 20 years left until retirement, you might consider a buy-to-let property as part of a diversified approach to your overall portfolio.

Insurance, however, is not so vital. “The protection issue is less important because the older your children are the less of a worry it is about how they would cope financially if something happened,” suggests Cuthbert.

Fifties

Your primary focus will be fine tuning finances ready for retirement so you will need to consult a financial adviser.

Broadly, in this age group, aim to have at least 50 per cent of investments in bonds — which are safer than equities — and the rest split between UK and international equities.

People with no pension need to look at alternative sources of income, suggests Bowes.

“If you have a couple of hundred thousand pounds in savings accounts and Isas you can use that for your retirement instead,” she says.

Now is also the time to consider the likely impact in terms of the potential inheritance tax burden on your estate.

If you have lots of assets, for example, it may be worth looking at the rules governing tax-free gifts to friends and relatives.

*********************************************************************

BACK TO 'YOUR MONEY' FOR MORE TOP STORIES

*********************************************************************