Financial Confessions of a Baby Boomer
Today’s blog post is guest-written by a family friend who shares my interest in financial literacy. I am always keen to include different perspectives on financial topics so please do let me know if you have a blog post you would like me to feature!
Firstly let me declare my interests. I’ve known Thomas since before he was born by way of being old friends of his parents. So in the context of most of the readership of The Bank Engine - a really old guy! However, I share his passion for financial literacy of the younger generation and would like to add my support and personal experiences to show much of what is written on the website is real life.
As I (just) qualify as a baby boomer I’m approaching retirement, and let me tell you that it creeps up really fast so don’t delay your investment plans. After all, it’s “time in the market, not timing the market” that counts.
Many years ago it did exactly as referenced in Thomas’ post on calculating your retirement age, and figured I’d like to have passive income in retirement of £50,000. As per the 4% rule I’d need about £1,000,000 in investment. Whoa! I hear you say - where am I going to get that from?
Well #1 you need a long term plan, and you need to stick to it. In my case I set about the following:
Home ownership
Buy your own (modest!) home and pay off the mortgage as fast as you can. After all, the power of compounding interest works against you here. Resist the temptation to upgrade to match “the Joneses”.
Wise allocation of increased income
Every pay rise I got I put 50% into paying down the mortgage, and later investing into growth assets. I didn’t miss the extra increase but it was great to boost savings!
Sensible spending
Forgoing expensive overseas holidays - Fortunately, the kids we too young to realise what they were missing out on. But we didn’t entirely forgo holidays… just stayed with Thomas’ parents!!
Investing in growth assets
Once the mortgage was paid off, investing the same value in growth assets - in my case stocks and shares. An on-line share-trading account is remarkably easy and low cost to navigate to the “app-generation”. When I started, share trading was a closed shop of “the City” and they were reluctant to share this money generation, but now this is available to all as showcased here.
Increased tax awareness and planning
Where possible take advantage of tax concessions. In my case, it is advantageous for my wife to hold the bulk of our investments since her taxable income is lower than mine. I just have to be confident she’s not going to trade me in for a younger model! Additionally, there may be a tax advantage to co-contributing to workplace pensions.
Does it all go according to the plan – of course not! Who can predict the future? Who’d have thought Donald Trump could ever be President or that Charlie would ever be King? In my case, I went through two redundancies and major market set- backs of the GFC and Covid and at the time these seemed catastrophic. But “time heals all” as they say and, while there are up and downs, sticking to a long term strategy will pay dividends (literally!)
So as I approach my 60th birthday, am I there? I’m proud to say I am. Am I still working …yes, but not because I have to but because I enjoy it - for the most part- except for my Millennial co-workers who want it all now!
So what is different now and what might I do if I was a 22yr old?
Learn, learn learn
One the best investments you can make is in yourself. Sure formal qualifications are good but there is an enormous about of information available for those who seek it, but be sure you validate via multiple sources, beware many Influencers have a nice lifestyle via paid promotions.
Try
Seeking new investment opportunities can seem daunting. But often the best way to learn is to try, but just make sure you don’t bet the farm.
Embrace new opportunities
There is a plethora of new ways to provide income. The idea of a “job for life” is dead and buried and the more adaptable and experienced you are the more horse you can ride
And of course, invest for the long term… getting old(er) sneaks up on you!
Watch out for: The quick buck, and stick to what you know!