We are living longer and healthier lives. So our financial challenge, these days, is to ensure we do not out-live our money during the inevitable golden years. This is not as challenging as you may think if you start young enough – adequate time for financial planning is the key.
Balance Sheet Management is crucial, as your balance sheet is what you will retire with. It will provide you with an income when you retire. For true financial freedom, you require enough capital so that you don’t need to rely on your job. These investments include fixed assets like property, a portfolio of more tradable assets such as equities and bonds, pension/retirement accounts and liquid assets like cash.
Most of us, through necessity, have to start building capital by regular savings. As our savings turn into capital, and/or you receive an inheritance, it needs to be professionally managed in a way that reflects your tolerance to risk. This will generate investment returns as income and capital growth, which is reinvested to generate yet more income and capital growth. The continual reinvestment of your portfolio’s investment returns (known as compound growth) will eventually build a portfolio large enough to form a “retirement balance sheet”.
Simple yet due to financial products’ complexities and various risks, seeking professional advice is a prerequisite.