Insights categories - Personal investing
Personal investing

When the reality of saving for retirement sets in

As you approach your peak earning years and start to reap the rewards of the time and effort you have invested in your career, saving for retirement takes on a new sense of urgency. Having crossed the halfway mark in his career, Sikho Tatana shares his approach to long-term investing and sheds light on the lessons he wishes he had learnt sooner. 

When I started working, my views around money and long-term investing were very different. When we first start out, we don’t truly understand how our responsibilities and expenses will increase as we get older. We take our health and time for granted as we focus on living in the moment, under the assumption that the money will come. Like most of my peers, I spent the first few years concerned with furthering my education, establishing my career and meeting the needs that come with raising a young family. My focus has shifted in recent years. 

Long-term investing and retirement planning really become a priority when you have lived long enough to truly appreciate the value of time. With the bulk of your working years behind you, you have to make very deliberate financial decisions to make sure that you can enjoy your current standard of living and meet your financial needs in the years to come. 

Make money work for you

One of the most important lessons I have learnt is that you should make your money work for you. We spend a lot of time and energy working to earn our money, so it should return the favour. 

Most of us are all too familiar with how money can work against us: If we spend more than we earn and take on debt to fund our day-to-day lifestyle needs, we create long-term problems. Sadly, we are less familiar with how our money can work for us. It takes discipline to sit down, draw up a budget, and figure out how to use income to build lasting wealth. I encourage my peers to do the work, take the time to understand their finances, seek expert advice and invest in assets that will grow over time. 

Making money work for you also involves making tough decisions. The reality is that many of us are responsible for supporting members of our extended families and need to step in when times are tough and unexpected expenses arise. This can mean dipping into money that has been put aside for long-term needs. It can be extremely challenging to balance the needs of our loved ones with our future needs; I try to prioritise as best as I can. 

Your children should be part of your wealth creation

I often hear people talking about creating generational wealth that can be passed on to your children’s children. In my view, this requires making sacrifices, committing to a long-term strategy and involving your children as early as you can. 

When I look back, I wish I had invested more money in property and prioritised paying it off. While this hindsight does little to drastically change my circumstances, it allows me to be more deliberate about how I think about the future, and helps me start important conversations with my children. In addition to the lessons they learn by watching us manage money in our household, I make a point of talking to my children about money. 

One of the most important lessons I am trying to teach them is the need for diversification. The recent COVID-19 pandemic has reminded us how important it is to spread our investment risk across various asset classes and regions. As we teach our kids to avoid placing all their eggs in one basket when it comes to figuring out what they should do with their lives, we should extend this lesson to money and encourage them to diversify their investments from an early age. 

Thinking about how your children relate to money is an important part of your long-term financial planning. As parents, we invest as much as we can in our children. We want them to succeed and enjoy a bright future. Are you raising financially literate children who will be independent and make good money decisions, or will they be financially dependent on you long after you retire? 

Supporting adult children, and their children, can have a big impact on your financial circumstances when you retire, so it is critical to have these conversations early and lay a sturdy foundation to ensure that they flourish. 

It’s never too late to get started

The reality is that most of us haven’t saved enough for retirement. As you progress in your career, you may realise that you left it too late, but that doesn’t mean that you shouldn’t get started. The best time to start planning for retirement is when you start working. The second-best time to start planning for your retirement is right now. Taking a realistic assessment of where you are and making sacrifices to help you catch up can be done at any time. 

It is also important to remember that money isn’t the only measure of wealth. As we get on in life, we begin to really appreciate the value of our health, our relationships and spending time with our families. A solid financial plan, compiled with the help of a good, independent financial adviser, will take all of this into account, supporting the things you value the most.

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