One of the main keys to good money management is to be clear that the financial needs will not be the same throughout your life.
This is basic since, in effect, according to our age, our financial needs are generally changing. It is true that, as in everything, there may be exceptions. But as a general rule, investing at 30 will never be the same as doing at 50. The reason is that your goals and needs change over time.
When you start your professional life , and your income begins to be more fluid and constant, it is the right time to also start allocating a part of your money to savings and investment. The reason is simple, the more time you have to save and invest more possibilities to generate a good added capital for the future you will have.
Invest at 30
When you enter your 30s and face the third decade of your life, you will usually be starting to sit in the labor market . It is also likely that you have already formed a family or are close to doing so, of course at this point in life there are some issues that should be valued. A good example of this is to learn how to calculate the cost of your life insurance , something important that should be incorporated at the same time in which you form a family, and especially when it depends directly on your income.
When you consider investments and savings at 30, you have a great advantage in your favor; The time horizon with retirement is more than three decades. If we take into account that one of the main actors within the savings objectives is precisely the savings for retirement, we see that this long distance allows us a greater room for maneuver.
In other words, we can start saving before but we can also take certain risks thanks to the distance that still separates us from retirement . A good example is when you opt for products such as Unit Linked . It is an investment product in which, structured around life insurance , our money will end up being invested in a basket of funds , in which, as with any profiled portfolio, the risk will be graded according to our preferences. That is, a product that effectively combines the possibility of assuming certain risks, seeking greater returns , with life insurance.
In short, when you decide to make investments at 30, you usually do it taking into account factors such as distance from retirement, the possibility of taking certain risks thanks to the long period of time you have left, but also with the responsibility likely to have assumed long-term debts, such as the acquisition of a home.
Invest at 50
It is clear that each person is a world and therefore, there will not be two equal cases in terms of investment needs at age 50 . But, if we could distinguish two large groups of people:
The first group is one in which people have done their retirement savings duties and have been contributing to their retirement plans for an important period. These people have an important part of their saving task done, and therefore, probably at this point in life where debts like the mortgage are nearing their end, they can consider being somewhat more aggressive with that part of the money left over from the saving.
This is easy to understand: if you have been contributing to your pension plan since the age of 30 and supplementing it with retirement savings in other products, when you reach age 50 you do not need to contribute a high fee to be able to raise that capital that you allow you to retire without loss of purchasing power. Therefore, you can save more , in this case one part of the savings will continue going in the direction of complementing your retirement income, but with the other part of the savings you can perfectly assume investor risks , since it is a money that will not harm your general economy if You lose in an investment.
Usually at age 50 we tend to secure our previous investments
And to consolidate what has already been achieved, reducing the risk of your investments is a good idea because there is less room for improvement. In addition, in the short term it is easier for volatility to appear than for longer periods of time, where the average will end up being imposed. In other words, it is difficult to know what the market will do tomorrow, but easier what it will do in 10 years. Limiting risk by fleeing volatile investments is the way to protect yourself from this situation.
In other words, from these ages, savings insurance and other more conservative investments make more sense.