A time will come in every man’s life when they will account for how they lived. No. I’m not talking about judgement day- perhaps another time. I am talking about the future, when you retire and plan to start living out the remainder of your years.
How prepared are you? Rather, how well are you preparing now? Most people believe that retirement is a distant future and they can start making plans later in life. They couldn’t be more wrong. The best time to start preparing for retirement is the day you receive your first pay check.
Unfortunately, despite the numerous financial and investment courses in school, personal finance is not yet an official course to be studied. It is therefore not surprising if you are finding budgeting and personal cashflow a bit of a challenge.
To help you get acclimatized with the basics, here are few important tips that could buffer your landing in future:
1. Practice self-control
If you had tough parents, perhaps like the mom in Amy Chua’s Battle Hymn of the Tiger Mom, you might have learned this the hard way. Otherwise, it would benefit you to learn to practice delayed gratification because your finances would be better when you do. While there is some satisfaction in being able to request credit whenever you want, it is a lot more gratifying when you save up for it.
Beware of making all your purchases via credit cards, irrespective of whether you a financially able to sort the fees at the end of the month. The truth is you could end up still paying off those debts many years later. Learn to practice self-control and keep your credit cards limited.
2. Take charge of your financial future
If you are clueless about managing your own money, there’s a good chance someone else will do it for you. And it may not always be good news. Sometimes mismanagement may be intentional from an incompetent overcharging wealth manager, or unintentional like when Grandma urges you to buy a home when you are better off on a variable rate mortgage.
A common saying goes, you are your own best teacher. Become a master at managing your own money. Not everything needs to be outsourced; you could start by downloading a simple money managing app. There are programs that give you a daily overview of your expenses. Always be mindful of your cashflow.
3. Open a retirement account
Like I mentioned previously, saving for retirement should begin when you receive your first salary. Decide how much you would like to put into the account every month. Some people go by the 50/30/20 rule which says 50% of your earnings should go to essential expenses (bills and purchases), 30% to your discretionary needs (vacation) and 20% to financial priorities such as retirement funds.
According to Bob Richards of Retirement Income, the 50/30/20 rule works for many but isn’t exactly a panacea in finance management.
“Depending on how much you earn, this formula may not be entirely feasible. Work along your realities. The most important thing is to keep a certain percentage for retirement at the end of the day,” he says.
4. Plan for your mortgage
One of the biggest investments any man will make in his life is to own their own home. There is nothing like being a homeowner; it would tell poorly if you still kept paying rent well into your 40s. Unfortunately, the market is unpredictable and economies under-perform, so planning a strategy for mortgage early enough can save you the hassle.
Plan for your mortgage today. Pick a catalogue and select your dream home. Work out how much you can contribute monthly on your income over a period to own the home. It doesn’t matter if you aren’t ‘settled’ yet, having a mapped-out strategy for the next few years is a good start.
5. Try alternative streams of income
This is the 21st century, unlike the time of Gen X when having one income stream was sufficient even till retirement, it is savvy to develop alternative income streams. Your day job can only take you so far. The internet is a treasure trove of money making opportunities. From affiliate marketing to blogging and YouTube subscriber videos you can try your hand at something you are passionate about.
If you are inclined towards finance, online Forex trading is a likely solution. When you make extra income, you can diversify your expenses and contribute some to your retirement saving account. You can even plan with your partner for something worthwhile.
Are you currently on top of your financial situation? The future is not as far as you think, start today to prepare a soft landing for yourself and family.
