Hi Vanessa,
I grew up poor and as a result, I have a very risk-averse relationship with money.
I am 53 years old and with a lot of hard work I have achieved my long-term goal of not having to pay a mortgage.
This means I now have a lot more disposable income (about $4,000 a month) to save or spend.
My friends tell me to buy a property as an investment, but the idea of going into debt again, even if it is “good debt,” scares me.
Should I simply put $2,000 of my monthly disposable income into a retirement account and the other $2,000 into a savings account that I can access whenever I want?
I don’t want to buy stocks, I prefer the security of a savings account even if the returns are lower.
Thank you,
Kate.
Send your questions to Vanessa at bloomafter50@dailymail.com.au.
If you want to learn more about how to identify your life goals and how to spend your money to achieve them, check out my mini-course. Designing the life of your dreams here.
Leading financial educator Vanessa Stoykov answers readers’ questions about how to best prepare for a fun-filled retirement in her weekly column Flourishing After 50
Hi Kate,
First of all, congratulations on reaching your goal of not having to pay a mortgage. That’s an incredible achievement! Many people in their 50s still struggle with debt, and the fact that you’ve worked so hard to get here is a testament to your determination. You should be very proud of what you’ve accomplished.
You have a great question and I wanted to share the story of someone I know who was in a similar situation, which might help you navigate the next stage of financial decision making.
Let me tell you about my friend Sarah. Sarah grew up in a family where money was always tight. Like you, she worked hard to get by and set out to pay off her mortgage. She was determined to never feel the insecurity of debt again. By the time she was in her 50s, she found herself mortgage-free and, for the first time, with extra disposable income.
Like you, Sarah’s friends were very interested in investing in property or shares, but she couldn’t bear the thought of going into debt again, even if everyone told her it was “good debt.” After so many years of playing it safe, Sarah was reluctant to take risks and didn’t want to lose the sense of security she had worked so hard to build.
Here’s what Sarah did. She didn’t ignore her friends’ advice, but she didn’t rush into something she wasn’t comfortable with, either. She split her extra income just like you’re thinking about doing: half in her retirement fund and half in an affordable, high-interest savings account. This gave her the best of both worlds: growing her wealth over the long term through her retirement fund, while having the peace of mind of knowing she had cash on hand if she ever needed it.
But before you make any decisions, let me share what my friend Natallia Smith, an independent financial planner, who specializes in helping women in Truwealth Consulting I had to say about your question:
‘Before making any decisions, it’s important to pause and reflect on your financial goals, both short- and long-term. What do you envision for yourself? Perhaps that well-deserved vacation, or maybe an early retirement? Your money is simply a tool to help you achieve those dreams, so keeping them in mind is essential.
‘Setting aside $2,000 a month in a savings account gives you a reliable safety net for emergencies or unexpected expenses, which can offer a real sense of security. It’s also a great way to save for any short-term goals you may have. Given your background, it’s completely understandable that you might feel wary of riskier investments, such as property or stocks, which can feel overwhelming.
‘While growth assets such as real estate or stocks can offer higher returns over the long term, they come with higher risk. They are typically better suited to those who are more comfortable with uncertainty and have a longer time horizon.’
Financial planner Natallia Smith of Truwealth Advice specialises in helping women achieve their financial goals.
‘However, your consideration of contributing to retirement is an excellent idea. It is a powerful way to increase your retirement savings, offering tax advantages and the opportunity for long-term growth. Retirement typically involves growth assets, but you can choose an investment option that fits your risk tolerance. It is always a good idea to review your retirement fund’s investment option to make sure it matches your retirement goals.
‘If you feel unsure or uncomfortable with these decisions, you are not alone. It is completely normal to have reservations, especially when it comes to your financial future. In this regard, seeking personalized professional financial advice can provide you with clarity and peace of mind.’
Do what feels right to you
At the end of the day, the best financial decisions are the ones that allow you to sleep at night. Sarah ended up thriving by sticking to what she felt was right for her while taking small steps to increase her wealth. She never regretted her choice because it fit within her comfort zone and she still has financial freedom today.
We’ll send you a copy of my book The Breakfast Club for 40-Somethings for asking such a thoughtful question, and I hope it gives you even more inspiration on your journey.
And for anyone else who has any questions about money or life after 50, feel free to drop me a line – there is no one-size-fits-all solution when it comes to finances and I’d love to help you find a path that works for you.
Vanessa.
