Free Stop Wasting Your Life & Do Something by Simon Smith Page A
Authors: Simon Smith
you earn into a pension fund for your future.
The way pensions work (at the time of writing and in the UK) is this:
Most pensions operate with funds similar to the pot theory I described earlier. They will allocate your money into low risk/low return, medium risk/medium return, and high risk/high return pots. You can also choose different types of funds such as real estate, retail, or international funds that invest in companies from other countries. You normally get a choice of funds/risk levels.
There is normally a management fee that the company that runs your pension will charge, but it’s normally so small that it’s not worth worrying about.
When you reach retirement age, you can either take your pension fund as a full pension that is paid monthly, or you can take a proportion of your fund as a tax-free lump sum, and a smaller monthly pension. The choice is up to you.
I would strongly recommend that you also contribute to your pension fund if you have the option. A lot of firms will match your contribution up to a certain amount, so if for example, you put 7% of your wages into a pension, your firm will match that 7%. This means that 14% of your wages goes into your pension fund, and it only costs you 7%. Sounds like a good deal to me!
The other benefit of contributing is that your contributions are deducted BEFORE tax. So you’re not paying tax on that portion of your income. Also, they take the money out at source, so you won’t miss it, as it’s never hit your bank account.
Obviously, this is an overly simplified description of how a pension works, but it gives you the gist of it without having to read a lot of boring brochures or workbooks.
Chapter 24
Insurance
Insurance is designed to protect you from the pitfalls that can naturally befall us all. Home insurance protects your home, car insurance protects your car, and financial insurance protects your finances.
You should always make sure you have enough insurance to put you back into the same position you are in now.
If you own gold – insure it.
If you own properties – insure them.
If you own jewellery or stamps – insure them.
If you own ideas – insure them. Get them protected.
If you own shares in companies – you’ll need to be your own insurance agent and keep an eye on them. You can’t insure them unfortunately.
Life insurance is one of the most important things you can do for your family. I’ve known of two men that were the parents of friends that died with zero life insurance. Their families were already devastated that they had lost their husband and father, so having no income, or way to pay the mortgage added to the woe and heartache. Losing a loved one is the worst thing that can happen, but being forced out of your home because there was no insurance in place just compounds it.
Life insurance can be purchased fairly cheaply, and you should always have enough to look after your family and pay off your mortgage if you have one. If you don’t, you should make sure you have enough insurance to pay your family’s bills for several years.
Whilst insurance can be seen as boring, you can’t underestimate how valuable it is in the event of a loss. Unless you’re so wealthy you could just replace anything you own out of your bank balance, you need to get some!
Chapter 25
Time
Time is something we all have in equal amounts. There are 24 hours in the day for the wealthy, and there are 24 hours in the day for the poor. You cannot get any more, and once you’ve spent it, it’s gone.
This is why it’s important to start the process of building your future security TODAY! Don’t wait and put things off like I did at the start of my adulthood. If you’re 16 years old and just started out making money, and if you follow the simple steps in this book, you could be wealthy and debt free by 40. If you’re 40 and reading this book and you haven’t
The way pensions work (at the time of writing and in the UK) is this:
Most pensions operate with funds similar to the pot theory I described earlier. They will allocate your money into low risk/low return, medium risk/medium return, and high risk/high return pots. You can also choose different types of funds such as real estate, retail, or international funds that invest in companies from other countries. You normally get a choice of funds/risk levels.
There is normally a management fee that the company that runs your pension will charge, but it’s normally so small that it’s not worth worrying about.
When you reach retirement age, you can either take your pension fund as a full pension that is paid monthly, or you can take a proportion of your fund as a tax-free lump sum, and a smaller monthly pension. The choice is up to you.
I would strongly recommend that you also contribute to your pension fund if you have the option. A lot of firms will match your contribution up to a certain amount, so if for example, you put 7% of your wages into a pension, your firm will match that 7%. This means that 14% of your wages goes into your pension fund, and it only costs you 7%. Sounds like a good deal to me!
The other benefit of contributing is that your contributions are deducted BEFORE tax. So you’re not paying tax on that portion of your income. Also, they take the money out at source, so you won’t miss it, as it’s never hit your bank account.
Obviously, this is an overly simplified description of how a pension works, but it gives you the gist of it without having to read a lot of boring brochures or workbooks.
Chapter 24
Insurance
Insurance is designed to protect you from the pitfalls that can naturally befall us all. Home insurance protects your home, car insurance protects your car, and financial insurance protects your finances.
You should always make sure you have enough insurance to put you back into the same position you are in now.
If you own gold – insure it.
If you own properties – insure them.
If you own jewellery or stamps – insure them.
If you own ideas – insure them. Get them protected.
If you own shares in companies – you’ll need to be your own insurance agent and keep an eye on them. You can’t insure them unfortunately.
Life insurance is one of the most important things you can do for your family. I’ve known of two men that were the parents of friends that died with zero life insurance. Their families were already devastated that they had lost their husband and father, so having no income, or way to pay the mortgage added to the woe and heartache. Losing a loved one is the worst thing that can happen, but being forced out of your home because there was no insurance in place just compounds it.
Life insurance can be purchased fairly cheaply, and you should always have enough to look after your family and pay off your mortgage if you have one. If you don’t, you should make sure you have enough insurance to pay your family’s bills for several years.
Whilst insurance can be seen as boring, you can’t underestimate how valuable it is in the event of a loss. Unless you’re so wealthy you could just replace anything you own out of your bank balance, you need to get some!
Chapter 25
Time
Time is something we all have in equal amounts. There are 24 hours in the day for the wealthy, and there are 24 hours in the day for the poor. You cannot get any more, and once you’ve spent it, it’s gone.
This is why it’s important to start the process of building your future security TODAY! Don’t wait and put things off like I did at the start of my adulthood. If you’re 16 years old and just started out making money, and if you follow the simple steps in this book, you could be wealthy and debt free by 40. If you’re 40 and reading this book and you haven’t
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