4 Reasons Why You May Not Have Enough Money Left in Future
Investing in your future is important and more important is to determine if you will have enough money left. Decision to start thinking about investing in your future only comes after realisation and we look at some reasons why you may be wrong in thinking you may have enough.
This insight also attempts to answer the following questions: -
Why you may be taking too less or too much risk?
How inflation is eating into your savings?
Why you may be investing for the past?
How you could save on taxes?
You are saving and not actually investing
When you save money, you keep it aside for emergency purposes or for planned needs. Any surplus money is simply earning a very basic interest rate which may not match your expectations going in the future. You may even be taking too little investment risk which may not generate enough returns or may be taking too much risk which may increase the possibility of larger losses which may not be appropriate based on your circumstances and needs.
You could either look to invest for growing your investments in the future or draw income from them.
You are ignoring inflation
When you save money, you keep it aside for emergency purposes or for planned needs. Any surplus money is simply earning a very basic interest rate which may not match your expectations going in the future. The question remains: Are you doing enough to beat inflation?
You believe history will repeat itself
Lot of investors look at how a fund manager has performed in the past or see the past returns. If someone has been good at generating returns in the past, it could be because the market conditions were conducive or the manager was simply lucky. Remember, if you get a monthly return of 2%, it does not mean, you get 24% returns in one year.
You are not using your full ISA allowance
Although contributions into your pensions pot are topped-up by the HMRC, withdrawals may be taxable in some cases. On the other hand, contributions to ISA are not topped up but withdrawals are tax-free. Not utilizing your full annual ISA allowances reduces your chances of making tax free gains.