When is the best time to start building wealth? That depends on your age. The earlier you start, the better it is. As time goes by, it will give you better financial choices in future.
WHEN YOU ARE IN YOUR 20s
Firstly, make sure you have an emergency fund. If you have a secure job or income, save up 3 to 6 months of monthly expenses in an emergency fund. If your job/income is not secure, example a sales job that pays you only commissions, save up to 6 or 12 months of monthly expenses in an emergency fund.
You can open a fixed deposit account with a bank or open a money market account with a mutual fund management company. If you are self-employed, make sure you have an EPF account for self-contribution or enrol in a private retirement scheme.
WHEN YOU ARE IN YOUR 30s
As you progress in your career with better income, do not fall into the “lifestyle trap” and spend all your newfound wealth. Instead, increase your contribution to your EPF or private retirement scheme. This is also the time to start investing.
You can start investing in properties, unit trust, stock, and bonds. A well-planned investment portfolio could generate 7%-8% annual returns averagely. This would mean your money would double averagely every 10 years. If you have children, start an education fund for them. You can start an education fund with a unit trust account, investment linked insurance policy or open an account with PTPTN (Perbadanan Tabung Pendidikan Tinggi Nasional).
WHEN YOU ARE IN YOUR 40s
This is the most challenging stage of our lives. Parents are aging, children are schooling and mortgages to service monthly.
Meanwhile you may also be progressing in your career. Review your financial planning. Ensure you and your family have adequate insurance coverages, especially medical coverage. Top up your retirement fund if you could.
WALKING INTO THE 50s
Retirement is just a decade away. Be seriously attentive to how you spend your money. Do you really need that new car or BMW to impress others or boost your ego?
Assess your assets and liabilities. Balance your portfolio to your needs. It is time to progressively reduce your exposure to high-risk investment.
REACHING 60s AND GOING BEYOND
If you have been financially prudent for the past 4 decades, you would surely be fine at this stage. Enjoy it and learn music or piano if you could. I read somewhere that learning to play a musical instrument at this age could keep Alzheimer away. I am not sure. You may try!
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(Adapted from an article written by Michelle Fox @ CNBC)