Noone knows what the future will bring in 2, 10 or 20 years. This thought become valid for almost every family. Since no one has the crystal ball, these kinds of questions remain unanswered. The one question we can answer is: what can I do today for to have a better life tomorrow? We will present you below few ideas on how to secure your future financial independence.
We can basically divide the views we have on the future into 3 types: a near future (up to 5 years), a midterm future (up to 15 years), and the late future (up to 30+ years).
When speaking of the near future, we need to point out a co-called financial reserve and our short-term goals such as, a car purchase, a property reconstruction, a property purchase. The financial reserve is the most important part of client’s financial portfolio. Why? It is a mean of covering your income loss and unexpected expenses. The financial reserves should be set up according to the family’s income and expenses.
The midterm future covers our goals and current expenses. It is very much mentioned also when purchasing a property. When purchasing a new property, usually it is a custom to buy new furniture, electronics, and design it. These are all things that could last up to 15 years, when they need innovating. In order to avoid applying for a loan,we secure the financial reserve today.
The late future is well-known, however many of us don’t want to think about it ahead. THE TIME IS MONEY and this is valid twice as much for our future. The long-term reserve should secure secure the financial reserve for retirement, mortgage pay-out or a new home purchase. As we have already mentioned in our blog article about the 2. Pillar changes,
the future of retirement for millennials is not much bright. Our retirement age has moved to 67 years, according to the current laws. It is a high-time to be prepared for retirement. The long-term reserve creates my future income. A present from me for me.
Let’s see more information about financial instruments that can help us create future reserves. The firt is an investment triangle, also called magical.
It is a base, which we observe while we are choosing from the individual financial instruments. Liquidity says how fast we can change an asset into cash. Risk is a loss probability or an investment success. Profit can be defined as an investment return. The higher the risk, the higher the risk it brings. However, it can be reduced by diversification, length of investment horizon and investment regularity.
- The near future - can be secured by the most liquid financial instruments in order to keep my finances on my account at least 7 days, with a short or without limitedness and stable minimal interest. For example, some types of saving accounts, deposits, property funds.
- The midterm future widens our options, such as stocks or bonds of their combination. You can also consider a term deposit, which is not that risky.
- The long-term future - is suited for the stock market investment. We could gain so-called interest-on-interest, securing us the purchase price of our financial means and also risk.
Investment with the goal to secure your own future is not complicated. At the beginning, think about your goals and expectations. Don’t forget about the risk you are willing to take. The right portfolio settings secure your stable cashflow. Literally for few euros monthly, you can spare.
And don’t forget that the future waits for those who are ready 😊
Your team ProFin Experts.
