Saving and investing for the future should, in theory, not differ significantly at the beginning, in the middle, and at the very end of a career.
Therefore, we asked experts Sandra Ferenčak, author of the blog MyTetka where she generously provides investment and savings advice, blogger Toni Vitali, known as the Frugal Islander, and Ivan Stojanović, a broker and the main person at OptimTrader for the Croatian market, who is also an investment influencer, what to pay attention to when saving and investing in your 20s, what savings-investment strategy to choose in middle age, and how to approach it towards the end of one’s working life.
Following the first part in which very popular financial blogger Sandra Ferenčak (MyTetka) shared financial advice, in the second part we bring financial advice from Toni Vitali (Frugal Islander).
Saving and investing should not differ significantly at the beginning, middle, or end of a career, believes Vitali. Of course, income and expenses will vary significantly throughout a career, and this will depend on the most important aspect of personal finance, which is the savings rate or the percentage of saved income. Not everyone can set aside a significant portion of their income, but for those who can, he recommends setting aside at least 20 percent of income to achieve long-term goals such as a secure retirement.
The more, the better
The more, the better, but of course, one should not go to extremes. There should be a balance between long-term planning and enjoying the present – advises Vitali, for whom the best investment, regardless of age, is in one’s own health. He believes that we should not hesitate to allocate any amount of time, energy, or money for health.
Vitali explains that the biggest differences he sees between people in their 20s, 40s, or 60s lie in financial goals and, of course, the time horizon, and paradoxically, most people start thinking about retirement only in their 40s or later, knowing that we can do much more with much smaller amounts if we start a bit earlier.
Young people: higher risk, higher return
– I would recommend all younger individuals to invest primarily in their knowledge and skills, and only then in capital markets. The human capital that a young person possesses allows for excellent ‘returns on investment’ in terms of investing in their own career and other sources of income. Likewise, potential risks are much lower when we have decades of work ahead of us and if no one is financially dependent on us. Therefore, mathematically, it pays off to take more risks while we are younger, both in terms of career and in terms of investing in capital markets. This is the time for relatively high risk and high returns in accordance with personal risk tolerance – said Vitali.
Middle age: concern for retirement
For those in middle age, Vitali recommends that, if they haven’t already, they definitely start saving and investing for retirement as soon as possible. It will come faster than one thinks, and with each passing year, that goal becomes increasingly difficult to achieve.
– It is enough to look at the state of the pension system today and demographic trends. A wise person knows enough. In middle age, one should invest with moderate to high risk, as it is usually still an investment horizon measured in decades – said Vitali.
Approaching retirement: the more conservative, the better
For those who are nearing retirement, the Frugal Islander recommends that they should have started saving and investing yesterday. Of course, he emphasizes that this investment must be somewhat more conservative, and with lower risk come lower returns.
