Your 40s are known to be a challenging decade financially, typically balancing the demands of lifestyle costs, children and their education, ageing parents and making increased space for retirement savings. Establishing good habits in your 30s helps. Tamryn Lamb shares some advice she would give to her 30-year-old self.
There was a time when I couldn’t have conceptualised writing an article that was framed from the perspective of someone in their 40s. It feels like just yesterday that I was finishing my studies and starting work – yet it has been over two decades. In fact, the older I get (and to be clear, I still consider myself a youngster), the more I realise how precious and perishable the concept of “enough time” is – in my personal life, for my health, for my career and, of course, for investing.
So, what would I tell the 30-year-old me? In no particular order:
1. Take some risks
You likely have, at least, a 30-year accumulation period ahead of you, most of which will hopefully be in some form of gainful employment – self-directed or more formal. You can afford to take risks and make a few mistakes. This includes taking on an appropriate level of “good debt”, for example to get onto the property ladder. You probably don’t need to worry too much about market cycles as most (not all) wash out over 30 years.
2. Work out early what your investing behavioural biases are
Most people start to save in earnest in their 30s. Yes, we know we should start in our 20s – but not everyone is in that position. Before you figure out how to invest, with who, and in what product and investment – it is a good idea to identify your behavioural weaknesses. Does your stomach drop when you see a decline on your statement? Do you overestimate your ability to pick that great idea? Do you worry when your friends tell you about an idea, and you think you might be missing out? Work out what will hold you back from making the right decisions, and then try to put mechanisms in place to “protect you from yourself”.
3. Don’t let your lifestyle increase at the same rate as your earnings
This is a hard one. Combining my studies, and my training contract at an accounting firm, I lived like a student for over eight years. When I got my first real pay cheque, I felt like a glucose-intolerant kid in the proverbial candy store. While this is probably to be expected, it’s important to take control of your budget early on and try not to let your spending habits increase at the same rate as your earnings. Your retirement pot will thank you.
4. Don’t succumb to inertia or the excuse of “I don’t have time to sort out my admin”
Life is busy. Most people in their 30s are juggling a job, starting a family, managing their extended family, etc. There can be times when months go by and you realise you haven’t sorted out that tax-free investment for your child or upped your contribution rate. Don’t succumb to that excuse. Treat each important, non-urgent decision as if you were retiring in three months, not three decades.
5. Figure out where you want to go – seek advice
There is that age old adage of “a cobbler’s son has no shoes”. I suspect there are a few in my industry who might say the same of their own investments; and plenty of experts in other industries who may shy away from asking for guidance of any sort. You may be a professional in your specific field, and be very smart – but seeking financial advice from a good, independent adviser helps you articulate your financial goals, introduces ideas that you may not have considered, puts a plan in place and then (hopefully) helps you get there.
6. What are the principles you want to teach your kids about money?
This doesn’t fit neatly into the theme of “what I would tell my 30-year-old self”, but life lessons are more genuinely imparted if you have established the habits early on and live by them yourself. My eldest is 11 years old, so I was just entering my 30s when she was born. I have had to think hard about what I want my daughters to understand about money, taking risks, the importance of savings and the beauty of compounding values over time. Admittedly the latter can be a somewhat dry subject and is harder to teach when you are competing with online games, and friends and sports. I have tried to put decisions in their hands, rewarding them when they defer immediate consumption by doubling any value they choose to save, for example. We have also given them their own accounts, so they can see how the values can increase (and decrease) over time. Of course, trying to explain the concept of asset management to an 8-year-old is not easy. After a few failed attempts, I was rewarded when my eldest was given a birthday gift of R200. She looked at it solemnly for a while and then handed it to me and said: “Please can you take it to work tomorrow and make it grow!” My 40-something self would like to tell this to my 30-year-old self every morning – both as a reminder of what I should do with my own investments, and also as a reminder of the responsibility we carry as stewards of clients’ hard-earned savings.
I realise none of these suggestions are new or particularly innovative, but as with many things in life, it is not that we don’t know what to do, but that doing what we need to do on a consistent basis is difficult. Hopefully the above provides some useful guidelines and reminders regardless of where you are in your investment journey.