Preparing for semiretirement

Maya Fisher-French
2018-02-24 23:19
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 Buti is looking forward to retirement after drawing up a long term plan. Picture: Leon Sadiki

Buti first read The 7 Habits of Highly Effective People by Stephen Covey while studying for an honours degree at what was then Rand Afrikaans University. The book has been an inspiration to him throughout his life and especially during his Money Makeover journey.

“There are two rules that I have applied to this competition: To start with the end in mind, thereby creating my own destiny, and to be steadfast and have the discipline to complete the goal,” says Buti about his plan to prepare himself for his second career.

Buti joined the Money Makeover competition because, at the age of 51, he must start thinking about his retirement. The mandatory retirement age at the SA Police Service (SAPS) is 60, but Buti knows that he will not be ready to put up his feet and watch the birds fly by.

Buti still has the energy and motivation to move into a second career, where he can follow his dream of becoming a university lecturer.

Although his retirement package is fairly good, thanks to a long service history with the SAPS, Buti entered the competition saddled with debt, and he needs to plan for his financial obligations regarding his children.

“I was so close to going into debt review to try to get my finances in order, and then I saw this competition,” says Buti, who has paid down R63 000 in debt in just five months.

The five-year plan

To achieve Buti’s five-year goal of being free of debt and ready to start his second career, his financial adviser, Matt Rudman of Absa, put together short-term, medium-term and long-term strategies.

READ: When car finance drags you down

Short-term (18-month) plan: Debt free and planning for expenses

You should never enter retirement with debt, so being free of debt must be Buti’s first priority.

Matt addressed Buti’s budget to have a clear understanding of his current cost of living and how this aligned with his budget.

“As Buti’s cost of living and budget weren’t aligned, he started using credit cards and personal loans to keep his head above water,” says Matt, who helped Buti put together a realistic budget plan.

READ: How to draw up a budget

With some discipline, Buti found that he had some extra cash to start paying off his credit cards and personal loans.

“I started to look at my bank statement and I realised how often I went to the bottle store,” says Buti, who is a generous person and enjoys entertaining.

Laughing, Buti says: “The first thing Matt said to me is: ‘You know you are on the right track when people call you stingy.’”

He says the publicity of the competition helps him say no to his family and friends.

READ: How to party on a budget

The second step was to build up liquidity for emergencies and future expenses within the short-term timeframe. Buti had to pay university registration fees as well as accommodation for his children, so Matt created a short-term savings plan to meet those needs.

“My daughter started university this year and she knows that her dad has it covered,” says a proud Buti.

The fact that Buti has been planning and saving for these expenses, rather than just paying for them with his credit card, has been the main reason he’s been able to pay the credit cards off so quickly.

Medium-term (two- to five-year) plan: Prepare for children’s education costs

As Buti still has four dependants who are busy with their studies, Matt had to make sure Buti had a back-up plan in case his dependants studied for longer than planned or struggled to find work afterwards. In retirement, it will be more difficult for Buti to handle these expenses, so he has to start putting money away while he is still being paid a full salary.

Matt also targeted Buti’s longer term debt, namely his home loan. By paying extra into his home loan each month, he will save on interest and reduce the term of the loan.

Long-term (five-year plus) plan: Ready for the future

“If we keep to the goals set out in the short-term and medium-term framework, the planning for the long-term goals falls perfectly in place,” says Matt.

The aim is for Buti to have his home loan paid off and to be free of debt within eight years – in time for retirement.

READ: How to slay the debt monster

If he achieves this, he will not need to work after retirement because his existing pension fund will be enough to sustain his lifestyle. The reason he’ll have this security during retirement is because he’s worked for the SAPS for many years and has been making monthly contributions towards a retirement find.

“However, Buti wants to become a part-time lecturer in the HR management field, and extra money earned from this will be used to spoil his kids and make sure he builds up enough funds for them to inherit one day,” says Matt.

Over the past five years, Buti has completed his master’s degree in management and is looking into doing a doctorate in HR management or performance management.

Covey would be proud as Buti proves that it is never too late to turn your finances around – it just takes a vision and discipline.

Tips for changing careers

Whether you are looking for a new lease of life in retirement or want a mid-career change, use your time wisely to plan, upskill and network.

Make sure it’s what you want: Research and investigate the field you want to move into. Buti has had experience as a teacher before joining the police and was also a volunteer lecturer at SAPS College and knows it is something he really enjoys doing.

What skills can you leverage? Maybe your current career is not your dream job, but what skills have you obtained that will help you move forward into your next career? Buti has hands-on experience of working in HR at a senior level and can bring practical experience into the lecture hall.

What skills do you need? Find out what skills you may be lacking and use the time that you are earning a salary in a secure job to study in the evenings and on weekends.

Buti realised that he would at the very least require a master’s degree to become a lecturer, which he completed while working full time. He also benefited from bursaries offered by his employer.

Network: Reach out to people in the industry and build up contacts. Speak to influencers about what they are looking for and what skills they value. Buti has already spoken to a university to secure work as an after-hours lecturer for part-time students.

Get your finances in order: A move into a second career often comes with a drop in salary because you still need to build up experience in the field. For many people, this second career could mean opening their own business and being self-employed. You cannot take on those risks if you are saddled with debt. Buti’s Money Makeover journey will make sure he is financially fit for the years ahead.

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