What are your plans after retirement? Do you want to travel the world? Put up a business? Move to a new home? Whatever your retirement goals are, one thing is for sure. You need money.
Wherever you are right now in your financial journey, you can make positive changes with your money habits. Check out these smart tips to save and grow your money so you can live your retirement life to the fullest.
Prioritize Paying off Your Debt
Living without debt is financially liberating. When you reach 50 or 60, you’re supposed to be enjoying the fruits of your labor—pension, savings, and other benefits and not paying off your mortgage or your car loan. If you can speed up paying your debts, do it. This could mean paying more than your monthly dues (anything in excess of the monthly repayment goes to the loan capital). Your goal is to eliminate big loans before retirement. If you have multiple loans, see if you can consolidate them.
Whatever your retirement goals are, one thing is for sure. You need money.
It’s okay to take personal loans during retirement, such as payday loans to cover important expenses like medications and home repairs. But at least you won’t get caught up with having so many debts to settle.
Master the 20/30/50 Rule
Many people struggle with saving money despite having a really high income. Why? Simple. They spend more than their means. If you’re guilty of this habit, Senator Elizabeth Warren recommends the 20/30/50 budgeting technique. The basic rule is to divide your after-tax income to three things: needs (50%), wants (30%), and savings (20%).
Needs are the bills you need to pay (mortgage, electricity, etc.) as well as the expenses necessary for your survival—food, gas, health care, and so on. Wants are the expenses that are not absolutely essential, such as your subscription to Netflix, the latest iPhone, an ultra-high-speed Internet, or a luxury car over a more economical vehicle.
Aim to allocate 20% of your income to your savings and investment plans. This could be in the form of adding money to your emergency fund, making IRA contributions, or investing in the stock market.
Diversify Your Investments
You don’t put all your eggs in one basket, so they say. Make sure you’re not investing all your money in a single account or investment type. Diversifying your portfolio benefits you in two ways. First, it gives you an opportunity to get a higher return. Second, it lowers the risk of losing money when one investment fails.
So how do you diversify your investments? Consider these strategies:
- Spread your wealth. Invest in a handful of companies you know instead of just one.
- Consider index or bond fund. By adding a fixed-income fund to your portfolio, you are protecting your money against market volatility and uncertainty.
- Watch out for portfolio overlaps. Pay attention to the investment class and type you are buying. Aim for a combination of stocks, bonds, commodities, and cash.
Make sure you’re not investing all your money in a single account or investment type.
Lower Your Expenses
Learning to manage your expenses solves many of your money issues and prepare you for a financially liberating retirement. Whether you’re struggling to save money, boost your retirement plan, or augment your investments, it all starts with being organized with your finances.
The good news is there are many ways to lower your expenses. Here are some tips:
- Use credit cards wisely. Don’t bring your card each time you go out. This helps resist the urge for unnecessary spending.
- Master the 30-day rule. Wait for at least 30 days before deciding on a purchase. You will be surprised by how much money you can save simply by waiting.
- Write a list before you go shopping. And stick to it!
- Cook instead of dining out. You won’t just save money. You'll also practice healthy eating.
Get Yourself Sufficient Life Insurance
If you don’t have life insurance or you think your coverage is not enough, you should consider getting yourself the right policy that meets your needs. The right insurance can help protect your income and savings, provides tax-free cash flow, and helps manage your taxes. Most of all, having it gives you peace of mind.
By making small actions today, you become one step closer to financial stability and freedom by the time you reach old age.
Experts recommend choosing the insurance coverage that is 7 to 10 times your salary. That means if your annual income is $60,000, you should get a plan that’s worth $420,000 at least. Consider a policy that is convertible to permanent insurance which lets you maintain your current health status throughout the life of the policy. Also, make sure that it fits into your retirement plan. Note that everyone has different needs and situations. Major events like marriage, changing jobs, buying a home, or having a child all signal changes in your financial plan.
Improve Your Finances
When it comes to improving your finances, sooner is better but NOW is the best time. Whether you’re in your early 20s or late 40s, you can take steps to improve your finances.
- Build an emergency fund. Prepare for a financial crisis by putting up an emergency savings account.
- Consider a side hustle. It should be something that reflects your hobby or interest, as well as your skills. It doesn’t have to be an elaborate business. It could be as simple as selling baked goodies during weekends or designing websites for your friends.
- Take advantage of your employee benefits. If the company you work for offers educational benefits, student loan repayment assistance, healthcare, retirement plan contributions, etc., take advantage of them.
- Automate bill payments. This does not only save you time and energy. It also ensures that you hit your savings benchmarks and avoid interests and charges for late repayments.
- Practice financial self-care. Just as you practice self-care to maintain good health, you also want to practice financial self-care, which means focusing on your finances and determining how much money fits into your lifestyle.
If you want to enjoy your retirement to the fullest, be sure to follow these tips. There is no best time to start managing your finances than NOW. Years go by so fast. By making small actions today, you become one step closer to financial stability and freedom by the time you reach old age.