This guest post comes from: Brendan ‘Take Charge of Your Money
Being able to retire in a financially secure position is a feat that few people attain. If you search online for statistics on the percentage of the population who are able to retire comfortably you will find some scary figures showing what a small percentage of people it really is.
It doesn’t matter whether you plan to retire at 65 or sooner. What matters is your plan and strategy and the day-to-day steps you take to achieve your goal. The traditional strategy of simply saving a lump sum each month is unfortunately proving to not be sufficient, unless of course you are a high-income earner and can invest a huge portion of your salary each month. The average Joe however can only save 10% – 15% of their salary each month (if that) and even if you do it over your entire working lifetime, chances are that it won’t be sufficient. Growth, economy, inflation, dependents,fees and administrative costs etc all have an effect and it is very easy to find yourself in a position where you simply cannot afford to retire.
If you plan to retire comfortably, ensure that your overall plan includes at least these 3 strategies.
Reduce living expenses
Reducing your living expenses has two interesting effects. Firstly, it allows you to save more towards your retirement (and possibly help you to retire sooner). Secondly, it reduces the amount that you need during retirement. Once you are accustomed to living with less, and you have been living on a reduced budget for many years, doing so during retirement will follow naturally. Thus again, perhaps this will assist you to retire sooner as you don’t necessarily need as much money as you think you do.
Reducing your expenses is an ongoing experiment whereby you figure out what is important to you and what isn’t. The process starts with a budget and assessment of all your expenses, and then over time you can work out what you need to do.
Many people talk about passive income, side hustles, stocks, investments and whatever other names are used. There are literally thousands of ideas and websites about what to do and what works best. I’m not going to make any suggestions on what you should do, but rather emphasize the need to do something to replace your income.
This new income that you generate should be something that will continue even when you stop working at it. Thus it really needs to be passive income. There is no shortcut or magic secret to generating such income, but hard work, determination, and a sound strategy can certainly assist.
As this additional income is only one part of your strategy, you only need to build it to a level that fits in with the rest of your strategy. Basing calculations on your current salary you earn from employment, perhaps you only need to generate the equivalent of 30% – 40% per month from your side hustle. This will differ from person to person depending on your goals and overall strategy. Work out what the figure is and then start planning to achieve it.
Invest in a traditional retirement plan
Invest in a traditional pension or retirement fund. This should form an important part of your strategy especially considering that most companies contribute towards your fund as part of your salary package. In most cases you have no choice so you really should take full advantage of this.
If you do not have a company-based retirement or pension fund you may opt to invest in Unit Trusts or some other form of investment. This section of your retirement plan though should be “low – medium risk” money on which you can rely when you reach retirement age. Thus, money that forms part of your retirement fund should not be invested in a high-risk environment where you could lose it.
Planning for your retirement is one of the biggest and scariest plans you will ever have to make. You will never know how much is enough or how your circumstances may change. There is also the risk of getting so caught up in the planning and saving that you miss out on life in the present. You need to find balance and enjoy every moment of life – the present and the future.
Brendan runs the blog ‘Take Charge of Your Money‘ which he set up after spending some time with people who have absolutely no control over their finances. His friends often ask for advice and he decided to start a blog to share ideas and concepts on how to really take charge your money and make it work for you.