Oran Hall | No Financial stability after working 39 years

Q UESTION: I am 57 years old and have been working unbroken since I was 18, and I am yet to establish a sound financial base. The only substantive asset I own is a five-bedroom two-storey dwelling house. I am heavily indebted and have limited investment in stocks and bonds. When I say limited, I mean limited as I only started late this year with a small sum. With approximately eight years to go before I retire, it has become a source of worry to me. I am developing stress and am unable to cope when I have to spend money as I am afraid of what may lie ahead. What is the best solution from here on in, firstly, in reducing my debts, and secondly, to construct a proper management of the limited resources I now have to secure financial stability heading into retirement?

– Campbell

FINANCIAL ADVISER: I can understand why you are concerned. The bright spot is that you see the need to confront and address your challenges although time is certainly not on your side. Not knowing the details of your situation, the best I can do is to make some general observations and comments.

Only you know how your situation has come to this, particularly considering that you have not had the misfortune of being out of a job since you were 18. You have not said if you are self-employed or have been providing a service to an employer. Neither have you said if there is some pension arrangement from which you can expect to benefit.

You have at least started to invest although your portfolio is small. You have to be careful now that you do not expose yourself to too much risk in your desperation to accumulate financial resources quickly, for while you could realise good returns if the markets do well, you could end up in a disastrous situation if they do not.

I do not know how helpful it is to say worrying does not solve a problem. It can, though, cause a problem as it can affect your health, so I suggest you find a way to address your issues without worrying about them.

In terms of your retirement, if your health is good, and there are opportunities to get employment beyond the time that your retirement is due to commence, seriously consider extending your working years. This should help you to provide for yourself longer and to accumulate resources for when you eventually quit work.

Although the benefits are not significant, the National Insurance Scheme (NIS) does offer some cushion to people who make contributions to it. Its health benefits, for instance, do add up, so I hope you have been contributing to the NIS.

Perhaps you have never operated on a budget, but late and hard as it is, I suggest you make a serious effort to make one and stick to it. I do not know what your lifestyle has been up to now, but certainly, you will have to make sacrifices and tighten your belt especially if you hope to bring your debts under control. At the same time, you must commit to save so that you can generate resources to invest.

You have not said anything about your family situation, and I do not know how your house is set up, but you may want to consider using it to generate some income by renting a part of it if that is possible. Some people also settle for a smaller house as retirement approaches. Where possible, some people also sell assets to generate funds to reduce debt.

The problem with making a late start is that it creates so much pressure because so much more of your resources must be put aside if you are to be able to establish a meaningful nest egg. An early start, even with small sums, makes use of the power of compounding over time, thus reducing headaches as retirement approaches.

In a sense, it is good that you have shared your experience, and I hope readers of this column can get a better understanding of the importance of good personal financial management. It is important to start early, to save and invest regularly, to control debt, and to plan with the end in view.

It is important to recognise that the only thing that is certain is uncertainty, so adequate preparation has to be made for the emergence of unfavourable developments, which may come unannounced. Sometimes we have control over what happens. Many times, we do not, but we should put ourselves in the best position to weather the storms when they come. I wish you well.

- Oran A. Hall, principal author of ‘The Handbook of Personal Financial Planning’, offers personal financial planning advice and counsel.finviser.jm@gmail.com