…because it is never too early to start planning for your future and build your retirement savings plan.
Every time my bank manager pays a visit to “take stock” of our investments, such as they are, it freaks me out a little. It gets me thinking—before I know it will be time to stress over filing income tax returns, pay insurance premiums and also budget for the coming year.
There used to be a time when I never worried about all that. Life was fun, I was much younger, work was great with a steady income and the future seemed far away. Of course, I had enough sense to plan ahead if only for a medical emergency.
Over the years, we’ve been more disciplined about savings, especially after the arrival of our son. Education alone is so expensive and perhaps the only wealth we’ll be able to bless him with. It isn’t always easy with me being a freelancer with an unsteady income.
Be that as it may, we have managed to be a little wise in saving and making a few investments. So it came as a bit of a jolt to me when my bank manager a.k.a. my financial adviser asked me what preparations I had made for my retirement. I was like eh? Me and retire? So yes, my husband has a retirement age at work. When I realized that it is just a few years down the line, I couldn’t help but muse. My financial whiz adviser quickly tallied what we had and what we would need as a steady income to live comfortably during those golden years.
You know what was fun, though? The fact that my son sat with us while we discussed this. He also got a lecture about how you can never start too early to plan for your future, your retirement. After all, every big goal, once set, has to be worked backward and split into smaller tasks with touch points to evaluate progress, right? Financial planning is no exception.
I thought I’d share a few tips–call them strategies–on how to plan for the future and make sure life is cozy when you are no longer drawing a regular income.
There is no need to feel financially strapped when you retire. Even though your income from your job is no longer coming in, you do have another cash source. That source is your home. As a homeowner, if you are at least 62, you may qualify for a reverse mortgage designed to protect retirees. It can do so by allowing you to quickly access and spend money that comes out of your home equity. The amount of equity available to you is determined by an online reverse mortgage calculator. The few minutes it takes for the reverse mortgage calculator tool to make those calculations is significantly less than the time it would take any person to do those calculations without technology. That is because government reverse mortgage standards and many other factors go into making such determinations.
A word of advice though; whether you’re just beginning your career or on the verge of retirement—take a look at what you’ve got in your savings account. I for one do not plan to slog all my life, and I am guessing nobody wants to do that—and that’s why we need to plan carefully. If you have a retirement fund, yay! to you. You need to think of how you can maximize those savings so you can live comfortably.
Here are 9 tips to start your retirement savings plan right away!
As I said earlier, never too soon to start planning for your retirement. While I may not have actually thought of retiring when I started my career at the age of 20, I did get a bank savings account. My first deposit was my scholarship. I also taught French and math and took care of some of our household expenses, much to the pride of my Uncle and Mom. Thanks to growing up in a frugal family, I developed the habit of saving for a rainy day. My Mom always kept cash in a cover in a safe place and called it our “oxygen” should there be an emergency. So the takeaway here is: make saving a habit. Be wise with your spending.
Open an Effective Savings Account
Yes, this deserves a separate mention because while my aunt’s method of saving cash in a kitchen container worked up to a point, it was too accessible. A savings account is a great starting point. These days there are options depending on your requirements enabling you choose the one best for you. Look for the best savings account interest rate to maximize your returns. Interest rates vary and so do the facilities each bank offers you. Do the research and pick what suits your needs.
Make a budget
This will depend on your lifestyle. I confess to splurging once in a while and then feeling guilty, thinking that I could have very well saved that money – but I did start each year with a list of goals and a wish list of things I wanted to achieve and acquire. I adjusted my lifestyle to accomplish those things. I looked for ways to save money and cut down in certain areas. For example, I walked the three kilometres to work rather than spend on transport. While it saved me substantial cash, it also kept me healthy, so win-win. I avoided eating out because that’s one big chunk of money saved. Good thing is, these also built long-term habits that did me good.
Clear Your Debts Quickly
It is just too easy these days to take a loan, what with all these banks and other agencies literally pushing cash in your face. The problem, though, is you’ll end up spending far more than the money you borrowed. So, if you happen to be in debt, look for ways to pay it off as soon as you can. Not only will you save overall interest, you are better off investing that money in your future, building your retirement corpus. I know that for certain things such as investing in property a loan is sometimes unavoidable; however, try and minimize borrowing money.
Work with a financial planner/adviser
Now, as much as I am aware that I want to save and prepare for the future, I don’t have the knowledge to plan it efficiently. I reached out for professional help to make the right choices and set realistic goals. It helped me also figure out how much I’d need to save each month and for how long, how much to keep for emergencies, what kind of investments to make, and so on. It helped me manage my work by setting income goals.
Take inflation into account
This is an unavoidable element in financial planning and I doubt if there’ll be a time when it will not rise. Not only does it feed on our current savings, but also eats up future savings. Which is precisely why saving must be a consistent habit. Start early, start young. One of the preferred savings methods is a Systematic Investment Plan or a SIP which is a steady way to grow your money and also balance your investments without putting in a lump sum at one go. Talk to a financial expert—most banks offer advice on how to adjust your investments with the changing markets so that you can stay on top of inflation.
Be wise on salary day!
Of course, you want to celebrate pay day with a treat and indulge in expenses you’ll probably regret later. However, most of us are blinded by those end-of-the-month woes. Just hold yourself in check by ensuring that you’ve got some savings plans in place – such as an EPF, a pension plan, etc. in place and the money is directly deducted from your pay check. If your salary is directly credited to your bank account as most organisations do these days, even better. Plan to save monthly with direct debits. I remember those days I used to have those Recurring Deposit where a specific amount would go from my savings account into it, earning a better interest than the savings account. Of course there are Fixed Deposits, too if you want to be careful.
Be choosy about where you invest
My financial adviser recommends that it is better to have a few good investments rather than spread oneself thin across schemes. That makes sense and a more manageable portfolio. Depending on your risk profile you might probably be investing in mutual funds and well-performing stocks after working out the returns over the duration of the investment. Once you set your goals, explore ways to reach them with the help of a reliable adviser.
Perhaps one of the best ways to forcibly save is via insurance. Luckily, these days there are plans to suit all lifestyles and incomes and most come with an investment component. Pick a plan that gives you good returns and keep up with your premium payments. The same goes for health. Get a health plan to take care of any unforeseen illnesses and hospitalizations.
The thing is, the older we grow, so do our responsibilities. This can be family, health issues, other expenses and recurring payments such as education fees, insurance premium, loan repayments, credit card payments, household expenses and other liabilities. So even when there’s an income coming in, much of it is reserved for these outgoing payments. That’s why it becomes all the more important to ensure that you start saving as early as you can to build that retirement fund for yourself.
Build the habit of saving. If you have kids, educate them about being prepared for the future. Once you make a retirement investment plan, be disciplined. Most things in life are successful only when there’s consistent and focused effort.
Have you planned your retirement?