After decades of hard work, we all dream of having a comfortable retirement – to spend the rest of our days in peace and harmony, to take some time out to focus on ourselves, to spend time with family and travel around the world, or to help in community services. But the next question that arises is – do you have the financial security you need if you’re giving up your monthly income for the next few decades? Here are 5 steps to help you plan for a secure future.
1. Check current financial situation
It’s a good idea to check available funds and analyse them to conclude your financial situation. Ask yourself questions like, “Will the money in my account be enough for the next few years?”, “Do I need to work longer and save more?”, “Are my current investments reaping me good benefits?”, and “Where else can I invest my money in?”
Once you’ve answered these questions, you can then proceed to plan for the future.
2. Analyse your spending requirements
After you are done analysing the situation, you can start to pan out expenses like mortgages, bill payments, car payments, medical insurance, etc. Create an estimate of how much money is required to cover these payments and then start saving up. Now that you have a plan of action, consider sticking to it for the time being and work for it.
3. Start investing. Now!
One of the major issues people face after they retire is poor planning. If you want to have a peaceful retirement, then start planning today!
What you do with the money depends entirely on how early you start saving. For instance, if you are planning to retire in the next 10-12 years then you need to accelerate your investment returns and you should consider investing in stocks. However, since you’re not able to bear too much risk, make sure to choose blue chip investments.
On the other hand, if you are young then considering a mix of high returns and safe debt instruments is a good idea. You can even invest in life insurance. Divide your savings into three equal parts and start saving a part each into insurance schemes, high returns instruments, and safe investment tools. A few decades down the line, you will have saved enough to live a happy and comfortable life.
4. The government can help
Systematic saving plans can save you in the time of need if you invest money in it monthly. The government has several tax efficient and flexible schemes including the National Pension Scheme (NPS), where you will receive the fruits of your effort once you retire. Though there are different types of pension schemes and even some SIPs that structure retirement planning, the tax savings benefits you receive with NPS can often sway your decision. Ignore NPS at your own risk.
5. Build a side income
It’s difficult to live a comfortable life when there isn’t a stable income. Hence, it is prudent to get all your finances in order before you decide to retire. And make sure you do whatever it is you need to do to get to that position. Maybe you can start a work from home business or if you have property on the side, consider putting it up for rent. Also start saving money in a high-interest, high return tool of investment like KyePot’s saving and borrowing groups, which will give you high monthly returns. And even after that if there isn’t enough money for retirement, then maybe work for a few more years before you reach that goal.
In conclusion, making sure there are enough funds to provide you a financial cushion is the crux of retirement. You should choose to spend your money wisely and save wisely. For instance, cancelling magazines subscriptions which you don’t read, selling the furniture you don’t need, and cutting trivial expenses will go a long way to give you extra savings. Hence, plan diligently and most importantly: stick to that plan.