Is it too late to save and invest at age 50?

Is it too late to save and invest at age 50?

Oct 09, 2013

Questions 1: Nice article about the 25-year old who asked about saving and investing wisely. (Click link to read article). How about the (25 x 2) year olds? – G via Facebook

Question 2: Hi Rose I read your article about saving and investing for the 25 year old. I’m a former Far East Bank employee and I wonder if you could also give me some tips. I’m reaching 50 and I still don’t have much savings. My son is only eight and I’m a single mom. Please help. Any advice on saving and financial stability would be greatly appreciated. Thanks and God bless. – Lace via Facebook

Like a lot of those who read the article on the 25 year old, you may have been jolted to realize that hey! she’s half my age and she’s already thinking of how to save and invest. Where have all my years gone?

I’ll be honest with you, it would have been better and a lot easier had you started at half your age because time is your best ally in wealth accumulation. However, you can still do a lot of things. It is never hopeless unless you think it is!

Here are some of the things you can do:

1. Define your dream life.  You are right smack in the middle of your journey. It’s time to assess how it has been and really decide on how you want it to move forward. We may not have control over how our life started but we definitely have control where to lead it. Define your dream life so that your financial goals will have meaningful bases. Only then can you put values on your goals.

2. Make an inventory of your financial life. List down all your accumulated assets and debts if any. Given that you were exposed to investment products at an early age because of your employment, why haven’t you accumulated enough? Did you purchase non-earning assets instead? This is not the time to justify your purchases anymore. It’s the time to review your past financial behavior by looking at what you’ve accumulated all these years. Put them in a form that can be easily updated. Make your Balance Sheet. Next, list down all your sources of income, expenses, savings, investments. This is better done on a monthly basis so it’s easier to handle. You may incorporate all these in your Statement of Income & Cashflow. Since you’ve worked in a bank, I hope you will not be intimidated by these reports. (Click link to know more about the importance of these reports.)

3. What do you feel after accomplishing your Balance Sheet and Statement of Income & Cashflow? Are there things that you can get rid off in your Balance Sheet? I suggest you also go through your closets, attic and other places in your house where you may have “non-performing assets” that you can sell. All these can bring you added cash. In your Statement of Income & Cashflow are there expenses that can be forgone? I suggest you find ways to cut down on them so that you can add to your savings and investments and please make them regular, if possible, automatic. You may also think of ways to increase your income stream.

4. Your eight year old son. Bring up your son well. I am sure that the dream life that you defined in number one has a lot to do with your son. May I just remind you not to spoil him? Do not give in to the temptation of making up for lost time (if you’re a busy working mom) and the absence of a father by buying him a lot of toys and going on expensive trips with him. In the end, you will be better off diverting the cash to his education fund. He has thirteen more years to stay in school and you will be around 63 years old by the time he graduates from college. So there’s a lot of work to be done here. Teach him how to live simply. I hope you can review the many articles I’ve written about raising children with high FQ so you can apply the tips that are relevant and in agreement with your family values.

5. Support from your son’s father. Your son has the right to receive support from his father. I do not know the circumstances of your single parenthood but if you’d rather not count on this, go ahead and save on your own for your son’s welfare. Just treat whatever comes from the father as bonus to be added to your son’s funds.

6. Don’t forget yourself. While it is your duty to provide well for your son, don’t forget to provide for yourself. Your retirement fund should be put in place ASAP. In computing for your retirement fund, you may look at several retirement calculators available online. You can now use your dream life as your basis for computing for this. (My simple formula is Annual Expenses x No. of Years Before You Go To Heaven, click link). Don’t feel that you’re starting from zero. Check out all the contributions you’ve made to your SSS or GSIS, your present employer’s benefits. Check the features on the tax exemptions and fund matching by employer, and see how you can maximize the benefits.

7. How do you envision your retirement? If you retire at age 60, your son will still be in school. Think about this carefully so you can plan ahead. You may opt to postpone retirement but maybe what’s good to do right now is to look at your gifts and strengths. What are you good at that you enjoy doing? Chances are you can earn something from that skill. You can start doing it now so that you can augment your income and accelerate your wealth accumulation. If it becomes successful, this can be your main occupation when you reach 60. It’s always good to know that you can still be productive beyond retirement.

8. Lifestyle Check. Living simply will not only allow you to accumulate wealth at a faster rate but will also decrease your target retirement fund.

9. Protection Funds. Check if your life insurance (term is the cheapest), emergency fund (at least 6 months of expenses) and health insurance (hopefully your employer provides this) are all in order. You asked for tips on financial stability and I cannot overemphasize the importance of these funds to weather unforeseen life events that can crate havoc in your finances.

10. Know your asset classes. There are different asset classes one can invest in such as equities (stocks), fixed income (bonds), cash equivalent (money market instruments), real estate, currencies, commodities, collectibles, derivatives, etc. Since you want financial stability I suggest you just focus on the first three or four. The last ones are for sophisticated investors. You may invest in the first three types via direct purchase of the assets or via pooled funds such as UITF or Mutual Funds. For your long-term needs invest in equities because this asset class provides the highest return in the long run. Have a good mix of equities and fixed income. Some use the rule of thumb 100 minus your age = percentage of equity. Your emergency fund should be in money market instruments so that it is readily available at a stable value while it earns even just a bit. Should you be able to accumulate enough to invest in real estate, future rental income can also help stabilize your financial condition. Just make sure that you’re ready to manage maintenance and tenant concerns. Read up and learn about the asset classes so you know what is best for you. The danger of not knowing enough and being exposed to agents left and right who give you free financial advice is that you might end up buying products not suitable to your needs and goals. Beware of conflict of interest inherent in zero income from advice but unlimited commissions on products sold. Stay away from investments that are too good to be true but turn out to be scams. And the best defense you can have against all these is your own knowledge.

11.  Go on with your journey. After you’ve set up your goals, help yourself by automating things. You have to make your saving and investing regular. Periodically review your Balance Sheet and Statements of Income & Cashflow. Involve your son to the extent that you think is appropriate.  

12. Go back to your WHY. It may be overwhelming for a single mom to do all these that it’s possible to get caught up in the details and the worries. Always remember to go back to why you’re doing all these. This will bring you back to your number one plus the realization that you are not just living for yourself and for your son. I’m sure in your midlife you have encountered moments when you asked about your purpose. Now is the time to really know it and do something about it and this entails using your resources on it.

I hope that the above points will help you in your quest for financial stability and a well-lived life. Cheers to turning Gold!


Greetings: Speaking of turning gold, happy 50th birthday to Jojo Madrid (today) and Cherry De Guzman (this weekend).