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10 Ways to Financially Prepare for Retirement

10 Ways to Financially Prepare for Retirement

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 April 3, 2019

    How to Nix Your Credit Card Debt in Less Than 3 Years

    How to Nix Your Credit Card Debt in Less Than 3 Years

    Debt is never a fun thing to be in. But, there are many actions that you can take that will help you rid yourself of the burden of debt once and for all.

    By coming up with a set plan, eliminating your debt can feel much easier than constantly thinking about it.

    This post will provide some tips on how you can do this to help you nix your credit card debt in less than 3 years.

    Hint: there are ways that are easier than you think.

    1. Consider Consolidating Multiple Credit Cards If Possible

    This may not be applicable to you, but if you have multiple cards – it is something to consider. Keeping up with multiple bills is time consuming.

    It will depend on the balance you have on each. Consolidate ones you can but do not do it to the point that you get too close to the maximum limit. Also, it is ideal to pick the card with the lower interest rate.

    Consider if there are any fees or alternatively, rewards, with transferring a balance to another card. Watch out for fees. Note that some cards offer rewards for transferring a balance to them. This is extra cash that can help go towards paying off your debt.

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    Having one or two cards can make nixing your debt much simpler than keeping up with the balance of a bunch of cards. Keeping track of paying the minimum towards a bunch of cards is time consuming. Spend the time to consolidate instead to make the overall process simpler going forward.

    My tip: Have one main credit card. Have a second one that you use for necessities – such as groceries or gas – that offers rewards for those purchases (a lot of cards do) and set the second one on auto-pay. You should be able to pay off a smaller amount on auto-pay if it is a necessity. If you think you cannot, then you may need to cut down a lot on expenses.

    Why do I suggest doing this? Having one thing set to auto-pay is one less thing to think about. One less thing to waste time on. Same idea with consolidating to one main card. Tracking down too many is a hassle.

    2. Try to Pay the Full Balance You Spent Each Month at the Very Least

    You need to pay off the amount you are spending each month when that bill comes in. This is the amount you spent THAT month.

    Do not let the debt keep accruing while you work on paying any unpaid debt that has accrued. It will become a never-ending battle. Try as best as you can to be current on paying for each month’s expenses when that month’s bill comes out.

    If this is a strain, consider why. You may need to cut expenses. Or you may need to consider other cards. Or look at where this money is going.

    3. Pay Extra When You Can – Every Small Amount Counts

    This cannot be emphasized enough. If you are looking at a lot of credit card debt, it can look daunting, but each extra amount that you can put towards the debt will really add up – no matter how small it is.

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    It does not just reduce the principal amount that you have left to pay off, but it reduces the amount that is collecting interest. You will always save money with that reduced interest.

    4. Create a Plan on How to Pay Extra

    Back to the main point, having this plan is giving you one less thing to think about.

    This plan should be a plan that works for you. If it does not work for you, your spending habits, and your views on debt, then it will not be an effective plan.

    For instance, if a set plan of an extra $50 (or another amount that you know you can afford) works for you, then do that. Set that aside every month and pay that extra amount. Treat it like a bill. Choose an amount that works for you and pay it like clockwork as though it was a bill you had to pay each month.

    Little amounts will not nix it entirely, but they will help tackle it and having a set plan can make it less of a chore. Creating a new plan of how much to put towards it each month is an unnecessary added stress.

    5. Cut out Costs for Services You Do Not Use

    If you are signed up for subscriptions that you do not use because of some free trial or for some other reason, cut it out. Your overall financial position will look better.

    In turn, that will make cutting your credit card debt easier. Look at your statements to find these expenses. If you do not use them, you may forget you are paying some unnecessary amount each month. Cutting it out can really add up in savings that you can put towards other needed expenses.

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    6. Get Aggressive About It

    Consider these points:

    Depending on the interest and the level of debt, you may need to give up a few indulgences. For example, instead of ordering delivery or going out to eat, cook at home. Everything adds up.

    Other things may be more of a sacrifice. It may be a trip you wanted to go on, or a daily latte habit you’ve picked up. In these instances, consider how important it is to you and if it’s worth the sacrifice. And if it is a costly expense, think whether you can wait to indulge.

    Cutting an extravagant expense can really help make a dent in your overall debt. Try not to add to debt when you are trying to pay it off. It will be a never-ending battle. Make it less of a battle with these tips and it will feel easier.

    Bottom line: Do what you can to make this process easier for you. Implement steps that do this. It takes time now, but will help overall. Also, keep track of your spending and paying down of your debts. Which is the next point.

    7. Reevaluate Your Progress at Set Intervals

    Doing a regular check-in can help you see your efforts pay off or maybe indicate that you need to give this a bit more effort. If you check every 3-6 months, it will not feel so much like a chore or feel so daunting.

    By doing this, you will be able to better understand your progress and perhaps readjust your plan. Bonus: if you see it pay off, it will feel great to do this check-in. You will get there.

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    Finally (and most importantly)…

    8. Keep Trying

    Do not get discouraged. Pushing it off will make it worse. Just keep trying.

    Once your debt becomes lower, each monthly payment will reduce the balance more. Why? You are paying less towards interest. It will be a snowball effect eventually and it will become much easier to manage. Just get to that point. And know once you do, it will feel easier and motivating.

    Start Knocking out Your Debt Today

    The best way to eliminate debt is to get started right away. Begin by implementing the above steps and watch your debt just melt away. Try out some of the above strategies and see what works best for you. Soon you’ll be on your way to a debt free life.

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    Featured photo credit: Pexels via pexels.com

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