The worst financial advice we receive – and what you should do instead

Published on 16th April, 2021 at 04:13 pm

People love to dish out advice, and the way we spend and save our money isn’t exempt. Here is the worst financial advice for each life stage and what you should do instead for long-term financial stability.

In your 20s

Bad advice: enjoy your money while you’re young. You can save when you’re older

The main problem with this outlook is that it doesn’t encourage you to be disciplined with your money and develop good saving habits. It also doesn’t allow you to make the most of compound interest. “The younger you start to save for big, important things like your retirement, the better,” says Lee Hancox, CFP, head: channel and segment marketing at Sanlam. “Even if you’re just saving small amounts each month, compound interest and time can work wonders.”

Our savings calculator is just the tool you need to get on track to your savings goals. Use it now to help you set the correct amount to put away each month.

In your 30s

Bad advice: avoid high-risk investments and opt for something more conservative

“If you’re 30 and planning to retire at 65, you have a 35-year investment horizon ahead of you,” says Hancox. This means that the chances of recovering from market volatility is possible. Being too conservative when it comes to your investments and savings can still yield results, but it won’t do your investment and interest-earning potential any favours. Instead of DIY-ing your investment portfolio, consult with a financial planner to invest according to your needs and goals. Book a meeting with one today.

In your 40s

Bad advice: you’re at the peak of your earning potential, so you are free to spend!

The phenomenon known as ‘lifestyle creep’ is prevalent among those in their 40s. This social pressure to spend to maintain, or elevate, your lifestyle can be immense. But it’s crucial to try and avoid temptation. “Avoid short-term debt wherever possible and try to stick to the spend-less-than-you-earn mantra,” says Hancox. “Make provision for the important things and set up an emergency fund for any unforeseen circumstances.”

In your 50s

Bad advice: if you’ve been consistently putting away retirement money, then you’ll definitely be covered

Just taking for granted that having been disciplined when it comes to investing in your retirement is, unfortunately, not enough. The 2018 Sanlam Benchmark Survey indicated that only 8% of South Africans will be able to substitute 75% of their final income after retirement. This is why it’s crucial that, by this life stage, you are aware of how much has accumulated and if it will be enough to sustain you for the rest of your life. If not, this gives you time to adjust your plans and prepare accordingly.

Want to know how much you should put away monthly to reach your retirement savings goal? Use this retirement calculator to get started.

In your 60s

Bad advice: you’ve spent your life saving money, so now it’s time to enjoy splashing it!

One of the worst pieces of financial advice that many entering retirement fall for is that they can kick back, relax and spend the fruits of their (years of hard) labour. People getting lump sum pay-outs often spend large amounts of it on big, non-essential expenses, such as travelling. While you are entitled to life’s luxuries after decades of work, it’s always a good idea to chat to your financial planner first so that you don’t put your savings in jeopardy.

Remember to always consult a professional when it comes to getting sound financial advice. Click here to speak to a trusted financial planner to help you plan towards your money goals.