Also read the following related article:

• Save for retirement at 45

Question:
I am currently 42 years of age with no life insurance or any other financial security. Where do I start or is it too late?

Answer:
It?s never too late to start with financial planning. The master crafter financial planner starts with where you are now, where you want to be one day and then helps you to get there.

Financial planning is a very personal thing and really it starts with what you want and expect out of your own circumstances.

Firstly, when does a person need life insurance?

Usually it is when a breadwinner is responsible for supporting or contributing to a family?s needs and that family will be compromised if a salary (or any type of income generated by her or him) is no longer earned by that person. In the event of death, a life insurance policy (actually called "assurance") would pay out a lump sum to help with expenses that were previously covered by his salary. Some assurance products pay out a monthly income for a term instead of a lump sum. Each person needs to work out which scenario is better for their circumstances. Disability insurance would work much in the same way.

The other instance where life cover is advisable is when you have a large debt, such as car finance or a house bond, or a credit card. You don?t want to leave all your debts for someone else to pay if you die. Sometimes the asset values are bigger than the debt, but these days that?s no longer a given.

What typically happens over a lifespan is that over time you accumulate assets or investments, saving for when you know one day you will stop working. As you accumulate wealth, the amount of life cover you may need should lessen as some of the risk is cushioned by your investments. You want to eventually be able to stop working and have enough investment income to replace your salary. Normally this is at retirement, but if you plan correctly it can be at any time before that!

So, what if you are already 42 and haven?t begun to save for the day you can?t earn a living anymore?

Again, this depends on how much you expect to need every month. If the state pension of R1080 per month is enough for you, you don?t have to do a thing. If you want an income of 75 percent of your current paycheque, and you still have another 25 years in which to save before you retire, and the post retirement income only needs to last 20 years before you die, assuming an average investment return pre- and post-retirement of inflation plus two percent (to be reasonably conservative), then you need to save 22.5 percent of your salary starting now.

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