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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 January 21, 2020

    How to Develop a Millionaire Mindset in 6 Simple Steps

    How to Develop a Millionaire Mindset in 6 Simple Steps

    We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

    It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

    How do you go about developing that millionaire mindset? By following these simple steps:

    1. Focus On What You Want – And Take It!

    So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

    Millionaires play to win, not to avoid defeat.

    This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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    2. Become Goal-Orientated

    It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

    Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

    Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

    Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

    You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

    If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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    If you are to become a millionaire, you need to start accumulating money.

    Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

    3. Don’t Spend Your Money – Invest It

    The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

    Stop working for your money and make your money work for you.

    Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

    There’s not just the stock market — there’s also property, and your own education.

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    4. Never Stop Learning

    The best thing you can invest in is yourself.

    Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

    Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

    Learn everything you can about how economics works, how the stocks markets work, how they trend.

    Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

    Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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    5. Think Big

    While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

    There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

    Aim for the stars, if you fail you’ll still be over the moon.

    6. Enjoy the Attention

    To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

    Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

    If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

    Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

    More About Thinking Smart

    Featured photo credit: Austin Distel via unsplash.com

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