Annuity or Savings Plan?

Investopedia.com said something very true, which is that most of us hope to live until a ripe old age, but longevity can have perils. Among them is the risk of outliving your money. I don’t know about you, but I think my money should outlive me, not the other way around. A good way to ensure that there is money coming in when we get older is to invest in an annuity or a savings plan.

An annuity is a contract with an insurer whereby you agree to pay the company a certain amount, either in a lump sum or through installments. In turn, the company makes a lump sum or series of payments to you at some future date. Sometimes those payments last for a specific time period like 10 years but annuities also offer lifetime disbursements. It is a great safety net for when we get older.

A savings plan is a flexible, affordable retirement investment plan which allows you to accumulate cash for long-term needs. The plan's maturity date should be between 50-70 years and at that time, you can get a tax-free lump sum and invest the remainder. The interest accumulated on this plan is very encouraging to say the least. The returns are even better if left until 60+ years.

Both options are key elements in retirement planning because they allow you to contribute toward your future cash flows. These plans can be subscribed to through some commercial banks and most insurance companies. The signup process is short and the agents are usually very helpful and knowledgeable. An annuity or a savings plan is beneficial even before retirement age because a percentage of the annual contribution is deductible for tax purposes. Isn’t that great? 

If you haven’t done so, I would definitely recommend that you put one or both of these plans in place. Your future self will thank you later.

General Saving/Spending Tips

We are surrounded by information that suggests one way or another for money to be spent or saved or whatever. Sometimes we may not be open to advice on managing money but great tips can go a long way once practiced diligently. Here are some tips for different areas relating to money. I believe knowledge is power so the more we know the more we can make wiser choices.

Budgeting Tips and Tricks

This is what I usually hear when we talk about budgeting:

I can't afford to budget...
I don't know where to start...
I don't need a budget because I already have a monthly surplus...


Whatever the circumstance, budgeting is an advantage to any and all financial situations. It enables you to know exactly where your money goes and sometimes we do not pay enough attention to this. Additionally, we should strive to live within our means and budgeting helps make this clear. There may be a sacrifice required but I have learned that it pays off.

For this post, I will share 2 videos I have found with great tips on how to get started on a budget.

Remember that it can be done, no matter your current circumstances.

What are your questions or concerns with budgeting? Comment below...

Plan for your Retirement

Unfortunately, retirement planning is not high on the to-do list of most young people today. This topic is often considered to be too far away for talking about early in life and that in my opinion is not true. My parents were very wise and frugal as they moved through life. They saved and planned for everything and now that they have retired, they are enjoying the benefits. I want my story to be similar, possibly with an earlier retirement age than what my parents had 😉. To accomplish that, there must be a plan.

After working hard, retirement should be enjoyed. Here are a few ideas to assist in preparing for that hopefully relaxing phase of life:

1.      Invest in an Annuity or a Savings Plan – This will ensure that there is money coming in when the plan matures. They can be set for various ages and I like the idea of having a plan mature about every 5 years starting at 50. (More on this topic in a later post)

2.      Pay off your mortgage – If you have one now, it is beneficial to not have such an expense when retired as you will have more need for your funds when you move from a salary to a pension

3.      Eliminate other debt – Pay off loans for vehicles or personal loans as far as possible before retirement. The mental freedom alone is worth it especially at that age.

4.      Save toward a vacation – Nothing feels better than knowing that you have worked hard and can enjoy the fruits of your labour.

These steps may seem simple, but over a lifetime of preparation the cumulative effects can be amazing and lead to the blissful retirement you always imagined.

Saving vs Investing

Some may use these words interchangeably but there is a difference in the meaning that we should understand and appreciate. Investing is putting money towards a profitable return whereas saving is setting aside a portion of current income for future use. Saving is great for short term to medium term projects and would even be appropriate for some long-term projects according to personal situations. Investing on the other hand requires a plan.

It is said that an average saver is better than a good investor who does not save. The two concepts go hand in hand but knowing which one to do when is important. How would we know which one is appropriate at a particular time?

When should you save?

• When a return on your money is not as important as the thing you are saving for.
• When you do not have an emergency fund
• When preparing for a big expense or recovering from a financial crisis

When should you invest?

•  When you understand the risk and reward - the chance of higher profits/returns also brings the chance of deeper losses and this assessment must be made and deemed acceptable in advance
• When you want a long-term arrangement, for instance, more than 2-3 years.
• When you desire a higher return than the average bank’s interest.

Whatever the choice, the goal is important. Consider carefully the task at hand, the level of return you hope to generate (if any) and the risk you are willing to take. Make the choice and then reap the reward.

Saving…..through a loan

The idea of a loan we have all come to know is where we receive a lump sum and then make payments subsequently to clear the outstanding amount. How about using a loan facility to save? Think of it as the traditional loan process in reverse – pay for a period of time and collect later. I came across this concept while exploring my saving options and it stayed with me because there was no need for my own collateral. So, in essence, you would make monthly payments for a pre-determined period of time (e.g. 2 years) and the “loan amount” will be held by the bank and only be redeemable once all payments are made.

What about interest? The monthly payments do include the interest charge, however, from what I have seen in my research, the bank rates are not unreasonable. For this purpose, I like to consider the interest as a “management or holding fee” mainly because the transaction is being handled by a bank and as a result, there is zero chance of the paid funds being tapped into randomly. For those of you who may have difficulty in saving, this option is a great way to achieve that goal and ensure that the payments being made go toward the intended result. Once the loan is paid up, the lump sum is received and you can enjoy your funds.

If you want to know more, feel free to email me.

Save for your entertainment

This concept may seem strange to some persons but I have been adopting this method for some years now and it has truly helped ease the stress that entertainment expenses can bring. Every now and then we should treat ourselves and do so responsibly.

Planning how money will be spent is important and if the thing you want to do is expensive, then all or at least half (just a suggestion) of the money needed can be accumulated beforehand through savings. Whether it is a vacation trip or a shopping spree, the fact that you have saved for this occasion makes it even better because you eliminate the mental stress of thinking, “Can I really afford it? How will I compensate for this purchase?”

Figure out how much money is needed and when, as it is important that you allow yourself sufficient time to accumulate the funds. Then, put aside the required monthly amount for the designated period until the event will take place and be disciplined enough to not spend from that reserve until the appointed time. Then go have some fun!

Save, Save, Save

So we hear it all the time, but how many of us actually do it?

Saving is crucial to financial stability and the earlier you start, the easier it will be.