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10 Ways to Financially Prepare for Retirement

10 Ways to Financially Prepare for Retirement
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While a number of developed economies throughout the world continue to showcase overt signs of growth, it appears as though everyday citizens are yet to feel the true benefit of this. This is especially true for those approaching retirement age, who, according to a 2013 HSBC report, are facing the prospect of exhausting all state and private pension funds within a relatively short period of time.

The survey, which canvassed the opinion of more than 15,000 respondents across a total of 15 global markets, suggested that the average citizen will have spent his state and occupational pension capital just 14 years into retirement. With the average international retirement length now 18 years, the failure to save can have significant implications for an entire generation of citizens.

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Practical Ways to Avoid Running Out Of Money in Retirement

    This problem can be overcome, although it requires individuals to adopt a proactive approach and consider alternative methods of generating and saving income. By thinking broadly and outside basic pension plans and savings accounts, it is possible to prepare for a bright and financially sound future beyond retirement.

    1. Live a frugal and enjoyable lifestyle

    For anyone who contributes to an occupational pension and is expecting to supplement this income with state funds beyond their retirement, there is a tendency to take a more relaxed approach towards making additional savings. This represents flawed thinking, however, as your ability to live a frugal and financially prudent lifestyle can boost your pension income and correct any potential shortfalls. Although this should not impact negatively on your enjoyment of life, it is important to cut costs where possible and maximise savings, discounts and promotional offers.

    2. Recognise yourself as a viable financial asset

    Beyond savings accounts, pension funds and fixed-rate bonds, you should also consider yourself as a viable financial asset. Equipped with knowledge, experience and a carefully honed skill-set, you have an innate capacity to earn that is likely to be the single most influential factor on the quality of your life beyond retirement. By recognising this quickly and maximising your earnings through activities such as freelancing and consultancy, you can lay the foundations for a financially prosperous retirement.

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    3. Learn to plan rather than save

    Goal setting is key to challenging established thinking patterns and cultivating more positive behaviour, especially when it comes to building and retaining wealth. It is important to set the right goals, however, as saving money is only possible if you can minimise spending, optimise your earning potential, and remain free from debt. This requires considerable forward planning, which enables you to consider your long term financial goals and minimise any risks that may prevent you from achieving them.

    4. Consider the dual benefits of healthy living

    We live in an age of information, where citizens have never been more knowledgeable about health issues and the impact of a poor dietary regime. Cultivating a healthier lifestyle not only enables you to improve physical fitness and live longer, but also provides you with an opportunity to save money by eliminating costly practices such as smoking, drinking alcohol and consuming fast food. Over time, these savings can quickly accumulate and boost your personal wealth considerably.

    5. Take advantage of financial freebies and tax breaks

    Taxation is not only a controversial issue in developed economies throughout the world, but also has a huge impact on your earning potential and capacity for long-term savings. As a financially astute individual, it is important to understand pension plans and tax laws, and use them to your advantage. In terms of private occupational pensions, for example, it is important to ensure that you match the contribution of your employers and access the free capital that is offered. Certain savings and retirement accounts also offer considerable tax breaks, alongside additional investment options that are free from capital gains scrutiny.

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    6. Develop financial literacy as a core skill

    This brings us to the need for financial literacy, which is now being considered as a core feature of the educational curriculum for students throughout developed economies. Without being financially literate, it is impossible to understand staple economic factors such as interest rates and their impact on investment income and earnings. More specifically, it is important to understand how fluctuating interest rates impact alternative investment options, so you can calculate which offer the best financial return at any given time.

    7. Follow economic trends and the course of inflation

    On a similar note, inflation and the cost of living are key economic factors that also impact disposable income levels. Not only is it important to understand these concepts, but there is also a need to follow the real-time economic trends that surround them. For example, it was recently announced that disposable income levels in the UK would not rise until at least 2015. This means that financially-aware consumers can look to regulate their spending and avoid heavy borrowing as inflation continues to rise disproportionately.

    8. Think like an entrepreneur and take calculated risks

    The nature of the global economy has changed considerably since the Great Recession, not least in terms of labour market evolution and the prevailing method of working in developed nations. As a result, we are now in the age of the ‘accidental entrepreneur’, who can be characterised as having a marketable skill and an appetite for taking calculated risks. This kind of mind-set is key when it comes to investing your hard-earned money, as you cannot hope to generate sizeable returns without placing your capital on the line in the first place. In the quest to supplement your retirement income, a slightly risk-averse approach can often deliver the best possible results.

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    9. Never borrow money to fund your lifestyle

    Economic recovery is often driven by consumer borrowing, especially in the modern age where there are a host of new and innovative short-term lending options available. While there is nothing necessarily wrong with this, it can become an issue when you borrow money as a way of bridging a short-term shortfall in income or sustaining an existing lifestyle. This leads to the cultivation of cyclical and long-term debt, which can slowly eradicate your savings over time. With this in mind, you should only ever borrow money with a clear goal in mind (such as an investment) and if you have calculated the potential risks and returns.

    10. Be proactive and continually look for new opportunities to save

    Above all else, your capacity to save money and boost your private pension income relies heavily on your outlook and financial philosophy. Even if you are in full-time employment and saving a considerable amount of money each month, it is crucial that you continually look for new opportunities and vehicles through which you can maximise your income. This type of proactive approach will reap significant rewards over time, especially for younger citizens who are still developing their career path.

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    Last Updated on July 20, 2021

    Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

    Financial Freedom is Not a Fantasy: 9 Secrets to Get You There
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    Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

    Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

    Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

    In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

    Break Free of Your Finances

    Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

    When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

    Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

    Though it seems hard to believe, it is really very simple to get financial freedom.

    To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

    While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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    Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

    1. Stop Unnecessary Spending

    We often spend money inwardly, instead of objectively.

    For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

    To stop this habitual spending, log down all your spending over the course of a month.

    Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

    This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

    2. Plan a Monthly Budget

    This is a great opportunity to get serious.

    Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

    Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

    3. Cut-up Credit Cards

    Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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    If not, you may want to consider ridding your life of the burden that credit cards bring.

    Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

    Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

    4. Increase Savings

    There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

    It’s good practice to save up to 15% of your income.

    Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

    Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

    5. Invest Wisely

    Consider investing in funds.

    Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

    To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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    Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

    6. Invest in Gold

    There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

    You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

    Another way to invest in gold is through ETFs (Exchange Traded Funds).

    These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

    With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

    7. Stash Emergency Funds

    Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

    If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

    Make it hard to get your cash.

    Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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    8. Find Fabulous Mentors

    Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

    If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

    There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

    9. Be Extra Patient

    Patience is the key of financial success.

    Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

    So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

    Financial Freedom for All

    Anyone can achieve financial freedom, regardless of their financial circumstance.

    Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

    Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

    Featured photo credit: rawpixel via unsplash.com

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    Reference

    [1] Hartford Gold Group: IRA Retirement Accounts

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