Things I wish I knew when I was 30

At 30 you may feel invincible and that decades of opportunity lie before you. But time waits for no one and financial planning decisions you make today can significantly impact your financial stability tomorrow. So it’s never too early to consider your future financial wellbeing.

Key to good financial advice is the creation of a financial plan. This may seem a rather daunting exercise, but it may be helpful to just jump in and get started. To that end, here’s a guide to some of the things I wish I knew about financial planning when I was 30. In my view, these are things every young person should be aware of.

Financial planning isn’t just about trying to build up your wealth, although that may be one part of the picture. When considered holistically, it’s about aiming to secure your best possible financial future in line with your personal goals. By setting goals and creating a roadmap to help you achieve them, you’re hopefully laying the groundwork for a more secure and comfortable life and greater overall wellbeing.

At Schroders Personal Wealth (SPW), we consider holistic financial planning to include four elements: protection, savings, pensions and mortgages. Each of these has a specific application for young people.

Protection

Amid the excitement of early career progression and personal milestones, taking out protection policies such as life insurance, critical illness cover and income protection may fall to the backburner. The reality, however, is that life is unpredictable. Adequate protection ensures you and your loved ones are sheltered from financial hardship if the unexpected strikes.

Savings

When you’re young, it’s easy to think that saving and investing means sacrificing your fun in the here and now. But I’ve come to realise that savings and investments are more about spreading your enjoyment across today and the future.

It’s important to find a balance between short and long-term goals here. A short-term emergency fund acts as a safety net for unexpected expenses, but saving and investing for longer term objectives, such as buying a home or retirement, is equally important.

There are some straightforward ways to boost your savings. You could put unexpected windfalls, such as tax refunds or bonuses, straight into your savings accounts. You could also make use of tax-efficient schemes such as stocks-and-shares ISAs, which can help grow your investment savings over time. Even so, the value of investments can fall as well as rise and you may not get back the amount you invested.

Pensions

Starting a pension early gives you the potential to significantly boost your retirement funding. This is because, as your pension fund generates returns, those returns themselves begin to earn returns, leading to a compounding effect over several decades.

Moreover, the younger you are, the more investment risk you are able to take on in your retirement portfolio. Higher risk portfolios can be more turbulent than lower risk portfolios, but they have the potential for higher returns in the long term. Younger people with longer time horizons are able to potentially benefit from this. Even so, the value of your retirement plan could fall below the amounts paid in.

You could also put tax refunds, bonuses or other windfalls into your pension as well as your savings, in line with your overall planning needs.

Mortgages

Planning for home ownership is a long-term undertaking that typically involves saving for a deposit, securing a mortgage and paying off your loan for several decades.

Mortgage providers may offer extended loan terms to young people, sometimes up to 35 or 40 years. Longer term mortgages generally involve lower monthly repayments, but it’s important to balance this with the risk of facing continued, unmanageable payments in old age. So you may want to ensure the term of your homeloan ends at the age you plan to retire.

How to start financial planning

If you’re feeling overwhelmed or unsure about where to begin with financial planning, it can be helpful to have a conversation. You could perhaps ask your parents or other loved ones about their experiences and you could make use of our guide to creating your own financial plan.

You may also choose to get professional advice from a financial planner, who can create a personalised plan to suit your goals and circumstances. At Schroders Personal Wealth, we offer an initial no obligation consultation. There are no hidden fees or charges, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.

It’s never too early to start planning for your financial future. Indeed there’s no time like the present. By taking proactive steps now, you’ll hopefully pave the way for your long-term financial wellbeing.