Life is unpredictable and the best saving plans for retirement can fall by the wayside when the unexpected strikes.
Losing a job, a relationship break up or serious illness can all throw financial plans into disarray, but other disruptions can have a devastating effect on savings as well – and here are some signs to watch for.
No emergency cash stash – If you do not have money set aside to cover unexpected car repairs or home maintenance, then you need to set up a savings account at the bank and put some money in each month to cover surprise expenses
Buying shares in the company where you work – As an employee you will have the offer of buying cheap stock. By all means take the opportunity, but do not over invest by making the shares your dominant investment.
If the firm hits a bad time or goes to the wall you are risking your savings and your job, so diversify your investments
Too much credit – If you rely on an overdraft, loans or credit cards to get through the month and cannot repay the balance straight away, you have too much debt. Start better budgeting and divert some of the cash spent on debt into savings
Your cash is in bricks and mortar – Property looks great on your net worth statement, especially if the mortgages are paid off, but you cannot spend bricks unless you convert them into cash either by selling or taking out another loan.
If you have a significant part of your wealth in property, then you may retire asset rich but cash poor
Don’t forget inflation – Central banks target inflation of 2% to 3% a year, so build that into your retirement budget and look for investments that will return more than the rate of expected inflation so your cash keeps pace with any rise in the cost of living
Keep your investments for as long as you can – Recent pension freedom statistics hinted many savers are taking cash from their pensions to put in the bank. This not only attracts tax but leaves the money languishing in an account paying little or no interest when a pension fund could still be growing
