Whether you’re in your twenties, thirties, or even forties; you may find yourself constantly taking on new financial responsibilities. With new experiences and changing circumstances, you will also find yourself setting new goals every now and then. Considering all this, it may not be easy to start preparing for the long term such as for your retirement. You can easily save up enough for a vacation but how prepared are you for the future? No matter what age you are, it’s important that you begin making plans and setting aside something for your retirement. Here are some useful tips to help you out:
#1. Start Early
Even if you’re still in your early twenties, you can’t go wrong if you start saving up at an early age. In fact, it’s ideal to start early because every dollar you save has enough time to become a significant part of your saving. If you’ve gotten your first full-time job, it’s definitely time to start thinking about setting aside a bit of cash for your retirement. Plan your budget and see if you can squeeze out even a tiny portion of your paycheck to deposit into your savings account.
#2. Find a Balance
Once you’re in your thirties, chances are that you’re a bit more established in terms of your finances. But having additional resources also means you’re likely to have greater financial responsibilities especially if you’ve hit some of your milestones like getting married or buying a house. So with new expenses, it can be easy to stray from your regular habit of saving for your retirement. Try to find a balance between your savings and your spending, while planning for other investments like your children’s college fund.
#3. Weigh Your Choices
It’s easy to make rash decisions especially when we come by a bit of extra cash. We might end up spending it on something completely useless. But if we consider our spending choice carefully, we could put the extra cash towards something more useful for the long run. It would help to weigh your choices carefully and measure the long-term benefit of your choices. For instance, a new car sounds like a great idea but maybe you can put it off for a while and put the extra money towards your retirement instead.
#4. Make the Most of Retirement Plans
Many offices provide an investment program wherein your employer matches the amount you contribute to your retirement. In the U.S., there are options like the IRA (Individual Retirement Account) and the 401(k) plan, which employees can make the most of. A program similar to this in India is the employee provident fund, which also necessitates that an employer matches an employee’s contribution. However, small businesses may not necessarily provide this if they have only a few employees.
#5. Re-consider your Mortgage
Owning a home can be a boon and a bane. While you have a valuable piece of asset, you also have the burden of paying off your mortgage. However, you might want to consider refinancing your home at a lower interest rate if you see that interest rates are falling. At the same time, you need to prioritize on paying off other forms of debt like credit card debt if the interest rate is much higher than that of your mortgage. It’s important that you consider this option carefully especially if you’re struggling to check your bad spending habits.
If you’re a resident of Canada, Australia, or the United States, you might even have the option to go for something like a reverse mortgage. This option applies only if you’re 62 years or older and the special loan frees you of the need to make monthly mortgage payments.
#6. Diversify your Investments
You have probably heard about how it’s not the best idea to rely on one thing entirely. So when you make a plan, you usually have a plan B. Just like this, you also need to have back-ups when making investments. If you’ve decided to try your hand in investments in order to save up for your future, one of the first rules is that you should always diversify your investment portfolio.
For instance, investing in stocks may offer huge payoffs but the change in markets can put this investment at a much greater risk. On the other hand, bonds have little to no risk while their payouts are much less than that of stocks. So even if you decide to go for something with huge payoffs like stocks, make sure you have something to rely on in case the market crashes. “Safe” options like bonds could act as your backup, so make sure you diversify your investment portfolio instead of sticking to only one option.
You now have some useful tips to help you get a better idea on saving for your retirement. You can customize your budget and savings according to your financial situation while using these tips as a reference.
Neeraj Kumawat is a marketing consultant and a passionate writer. He loves to shares his ideas on retirement, finance, money management etc. He loves travelling and reading travel books in the free time. You can find him on Twitter & Facebook .