Ask Melanie

Ask Melanie: plan for your retirement

Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to

PUBLISHED : Monday, 08 October, 2012, 12:00am
UPDATED : Monday, 08 October, 2012, 12:39am

My husband and I are in our mid 40s and we can't afford any setbacks. How should we approach our financial planning?

In our mid 40s the happy, or horrifying, realisation dawns that we've probably only got another 15-20 working years ahead of us. Even if we love what we do and plan to work well beyond age 65, most of us want that as an option not a necessity. That's wise given our ability to stay employed depends on factors sometimes out of our control, such as health, permanent shifts in the job market and the economy.

You are right to think about how you can improve your investing decisions. Most people make reactive, rather than proactive, financial decisions. They respond to what has happened rather than what may happen next. And something always happens next.

Making proactive decisions begins with working towards something. You might have short, medium and long term goals, such as educating your children, travel or retiring at a certain age.

As a starting point, sit down with your husband over a quiet dinner to talk through what's meaningful for each of you. Once you have identified even a few of the things that are important to both of you, and the time frames for achieving them, you are on your way to developing the framework of a financial plan.

The next step is to work out where you are now in relation to achieving your goals. Start with your balance sheet. Look at what you own, what you owe and the difference between them. Consider how much of that difference is represented by assets that are for personal use (home and car, for example) and how much is investment capital that can generate income after retirement.

Draw up the family budget built on the three pillars of any financial plan: saving, investing and income protection. Think in particular about using investing to limit the corrosive impact of inflation on your savings.

Make sure your goals, balance sheet and budget are written down. This forces you to be focused and accurate. It also forces you to confront things that perhaps you'd rather avoid.

At this point you will be gaining insights into whether everything is achievable. This will help define the strategies that may be acceptable to both of you. If you're still having doubts, take a deep breath and calmly discuss the trade-offs you might be prepared to make. Even the very wealthy make trade-offs. Could you trim the family budget to save more? Is that more comfortable to one, or both of you, than taking on more investment risk? Or will you save later and ensure the kids' college fees are paid now? Do you need to review assets and make some tactical decisions?

Warren Buffett said "to invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework."

Although he was speaking about investment markets, his approach applies to financial planning. If you make each decision through the prism of what you are trying to achieve, making the decisions that are right for you will become easier.

The views presented are of a general nature. For specific advice, talk to a professional planner. See the column archive at