By Paul Bromley, Special to Gulf News
17 September 2011
Q. I am a newlywed with a baby on the way and thinking of how I can ensure a steady financial future. My wife is not currently employed and I do not have any experience in investing, but I want to change that. I’d rather not go for high risk options at first. My income is unlikely to drastically increase over the next few years, but I do have a financial buffer in case the unexpected happens. How can I make the most out of the money I am making?
A. The realisation that your wife and newborn child are entirely dependent on you can be a tough wakeup call.
Fortunately, there are many life assurance or family Takaful benefits specifically and uniquely designed to deliver funds to your dependents when they need them the most. Nothing can replace your role as a husband or father, but it is crucial to be ready for worst-case scenarios — especially as your long-term funds are likely to be limited at this point.
The second area you need to consider is an emergency fund for short-term needs. Emergencies can mean unexpected expenditure related to job loss and illness or, if you are an expatriate, it could fund your trip home if all else fails. Aim to save around two or three months’ salary and ensure that the money is readily available and placed in an account with little chance of loss (for example a low-risk bank or deposit account).
Finally, you need to think about the longer term, which is where things can really start to get interesting. The key is to determine your objectives and priorities early on so you can maximise the impact of your funds.
To better plan for what lies ahead and to ascertain your attitude to risk, it is a good idea to seek the guidance of an independent financial adviser. This will help crystalise your goals for everything from schooling to retirement, as well as illuminate the risk profile of your investment options and the impact of inflation on your longer term financial roadmap. You will, however, remain in the driving seat when it comes to taking decisions and control of your financial future.
A degree of risk is often required to achieve inflation-beating returns, so you need to make sure you understand what you’re getting yourself into. Potential returns are linked to the level of risk — the higher the risk, the higher the potential returns. Once you understand your own risk appetite, which can be closely linked to the period over which you want to see returns, you will be able to wade through all those wealth-yielding opportunities that much easier.
Sometimes it is better to have a number of different investments and avoid putting all your eggs in one basket. Again, an independent financial adviser should be able to help you achieve a blended group of investments, known as a portfolio, designed to match your attitude to risk.
Finally, you need to recognise that decisions made today may well change over time, though this should not stop you from starting to save as soon as possible. By saving or investing little and often, even small amounts can benefit from interest, profit rates or investment returns, putting you well on the way to building up worthwhile funds — an essential buffer in a rapidly changing world.

Whichever way you proceed, it is important to periodically review progress against your goals. This will add to the sense of empowerment and achievement and, ultimately, the peace of mind that comes from successfully managing your own and your dependents financial future.