In you earlier life stages you will need a bigger house and car for your family but when you retire, a smaller car and house will do.
Life happens in stages and in every stage your financial needs will be different, which means that your financial plan should make provision for it.
This is why it is important to ensure that your financial plan is in line with your life stages.
Life rarely stands still, Melody Cloete, training specialist at Bidvest Life, says. “As we move from our first pay cheque to retirement, our responsibilities shift and our financial priorities should too.
“But where do you start? Your financial circumstances will look very different at 25 than at 55, which is why it is important to understand what to focus on at each chapter of our lives.”
Many young South Africans enter the workforce while juggling student debt, car repayments and the costs of living independently for the first time, she points out.
“This is the time to focus on the basics, such as understanding your payslip and tax obligations, finding the right medical cover for your needs, creating a realistic budget, building an emergency fund and insuring the important things first.”
She says it is also essential to understand that your income is your most valuable asset that pays for everything else in your life, from food and housing to healthcare.
“Protecting your ability to earn an income when illness or injury strikes should be your number one priority from your very first payday.”
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Stage 1: Building your career and starting a family between the ages of 25 and 35
Here, priorities typically broaden to include milestones such as buying a home, getting married, or starting a family, Cloete says.
“With dependents in the picture, life cover becomes important. If someone relies on your income, you must know they will be taken care of if you pass away.”
Traditionally, life cover pays out as a lump sum when you pass away, which enables your beneficiaries to settle large, one-off debts, such as a bond.
However, choosing a combination of Life Lump Sum and Life Income benefits goes one step further, giving your beneficiaries the peace of mind that they will also receive a dependable monthly income.
For instance, a Life Lump Sum benefit could help your family pay off a bond, while a Life Income benefit ensures they still have a regular ‘pay cheque’ for everyday expenses like school fees and groceries.
Cloete says this is also a good time to start saving for retirement, and the earlier you begin, the more you will benefit from the power of compounding interest to grow your savings over time.
“As you continue to build your life and begin acquiring assets like a house, a car, or valuable personal items and as others become financially dependent on you, it is equally important to draw up a will.
“This ensures that your debts are settled, your wealth is distributed according to your wishes and your loved ones are protected.”
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Stage 2: Balancing changes and new responsibilities in midlife between the ages of 35 and 50
By this stage, Cloete says, many people are juggling the competing responsibilities of advancing their careers, raising children, and often supporting ageing parents.
This ‘sandwich generation’ pressure can spread household finances thin, making it crucial to step back and reassess your financial plan.
“This is the time to focus on futureproofing your income and lifestyle. Ensure your life insurance policy keeps pace with your salary and your family’s needs. If you do not already have it, consider adding Extended Income Protection alongside Temporary Income Protection.
“This benefit pays up to 100% of your insured income until retirement if illness or injury prevents you from working, even if you are not permanently disabled, creating a stronger, longer-term safety net for you and your dependents.”
Cloete points out that your children’s school and university fees can be one of the biggest financial commitments during this stage, making it essential to start saving as early as possible.
“Work with a financial adviser to build a diverse investment portfolio that balances growth with risk, helping you meet your children’s educational needs while still building your own wealth for retirement.”
And finally, she says, revisit your long-term commitments: review your will, check that guardians and beneficiaries are up to date and ensure that your financial plan can evolve as your family’s needs change.
“Taking these steps now can give you peace of mind and a clear path forward, even in life’s busiest years.”
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Stage 3: Getting ready to retire … and then enjoying it after you turn 50
As retirement comes into view, shift your focus to ensure you are sufficiently financially resilient, she says.
“Settle major debts like your bond, boost your retirement savings and work with your financial adviser to transition from building wealth to strategically drawing on it, ensuring that you can enjoy retirement while still leaving a meaningful legacy.
“Also check that your will is up to date, covers your entire estate and clearly names your heirs. Remember, the beneficiaries of your life cover and retirement savings must be named in those policies.”
While your financial priorities will evolve with each stage of life, Cloete highlights two essential rules that will set you up for success:
- Protect your monthly income first. If illness or disability prevents you from earning, everything else in your financial plan is at risk.
- Keep your life insurance up to date. As your life evolves, your cover should grow and adapt alongside it.
Cloete also points out how valuable professional advice can be at every stage of life.
“A good financial adviser helps you regularly review your cover and investments, adjust them as your circumstances change and make informed decisions that keep you on track. Financial planning is not something you do once. It is a lifelong journey.”
