Most of us live by the funda of ‘Live in today. Enjoy the present. Don’t bother about the future.’ I would like to elaborate these phrases to make you understand the right way in which it should be taken. It means that do not pressurize yourself over future so much that the present moments of happiness slip through your hand without your even realizing. But it definitely does not mean that you should avoid planning for future at all.
Retirement planning does not require a financial qualification. It can be easily done by anyone who is willing to work for it.
First of all, why retirement planning is important?
- The word ‘Retirement’ makes it clear that you are no longer going to earn as much as you always did. But your daily expenditure remains the same. You need planning so that you do not have to compromise with your lifestyle.
- Inflation is another important factor. We all know that the value of money keeps degrading with time. We can never be sure whether the pension or annuity we will receive is going to be sufficient to meet our expenses during retirement.
- The expenses usually increased after retirement because of the medical expenses which always comes as an addition during that phase of life.
In a nutshell, to live life with dignity after retirement, you have to be financially strong. And trust me, it is no big deal. Follow these easy steps with discipline and get relieved from future worries.
1. Start saving today
It is better to start as early as possible. The earlier the better. In case you feel you are being late, don’t worry. Start saving today. Do not set a goal at the initial stage because in case your savings are low, it may discourage you. Try to observe yourself first. See how much money you can save. Even if the amount is very low, pat your back for at least giving it a start. Stay regular with the savings. Make sure you do not have any month when you didn’t save a penny.
2. Set the goal
When you see that you are successfully saving every month, do the calculations. See that how much money you will gather till retirement if you continue saving the same amount throughout your earning phase. Now, you will have the corpus amount in front of you. Analyze it yourself whether it will be sufficient for you and your spouse or not. If it is, then congratulate yourself. If not, then probably you will be having a goal amount by now. Fixing that goal will motivate you to save more every month.
3. Prioritize your expenses
Basically, we can categorize our expenses into three categories; basic expenses, luxury expenses, and contingency expenses. Basic one includes food, clothing and house rent or home loan EMI. Contingency expenses are the ones for which one is usually not prepared. They are the medical emergency, property damages due to natural calamities, house robbery and other such things. For such situations, we have the option of insurance. Then comes luxury expenses which include dining in a restaurant, going for a movie, buying jewelry or other expensive accessories. They are the ones a person can survive without which. You can compromise on your luxury expenses to save more.
I am not suggesting that you should kill your desires or stop enjoying your life. But you can avoid one or two unnecessary expenses to expand your savings. If you dine out four times in a month, make it three. If you see a brand new sunglasses on a showroom, control the urge of buying it if you already have one which is working great.
4. Loans and savings can go hand-in-hand
Even though you have loan EMIs to pay, don’t let it come on your way towards savings. Do not let your debts discourage you from saving. As I mentioned earlier, save as much amount you can after meeting all your obligations. The best part of retirement is that you will be debt-free by the time you retire. Therefore if you have enough saved money for that time, you can keep enjoying your life without compromise.
5. Pay raise shouldn’t mean expense raise
We do progress with time. We get bonus, promotion or a pay raise for our contribution towards the organization we work for. One mistake which we often do after getting such rewards is that we increase our expenditures as well. There is nothing wrong in it, but your savings should also increase in the same proportion. If you already have a goal amount which you want to own post-retirement, I believe this will automatically happen.
6. Count Insurance as saving not the expense
Do not sacrifice on insurance premium to save more money. Life insurance and health insurance are also a kind of savings to meet your contingency expenses. Moreover, the requirement of medical aids often increases post-retirement. At that time you will not regret having your medical insurance done.
7. Keep revising your goal amount
After a period of every five or ten years, keep revising the amount which you set as a goal for your retirement. It is important because time keeps changing. Value of money keeps changing. Other than that, many other goals keep adding with time. For example, you may want to on a world tour once you are free from all your responsibilities.
8. Invest your savings judiciously
Mere saving will not help you achieve your goal. You have to generate more money out of it. For that, invest your money on such financial instruments which can generate you enough returns in long term. Take the advice of a financial adviser in case you are not sure where to invest your money.
9. Adopt a simple and healthy lifestyle
A simple and healthy lifestyle can keep you from being prodigal. It will not only motivate you to avoid spending frivolously but will also reduce your medical expenses. Take a healthy diet, do some exercise or at least take a walk in the morning. Your body must be healthy to enjoy the money you saved for the retirement.
10. Teach your children financial planning
The contribution of your family also plays a major role in the achievement of your goals. Teach them saving at a younger age. Also, discourage the habit of frivolous expenditure in them. If your kids have the habit of spending extravagantly, then no matter how much you earn you may not be able to save enough for your retirement.