On a busy day at work, with the frustrations associated with it, and all the deadlines that you have to meet in mind, has this thought ever crossed your mind? “When will I be able to retire?
You are certainly asking the right questions if you did not ask them before. For a person in her 20s, retirement wouldn't be the pressing issue on their minds. Many at this stage would be thinking:
“Oh, retirement, well I am just 25! Gee i got a heck lot of time to think about it”
Or
“Well let the time come, then we will see”
Well if you fall in that category, then beware, you are probably heading towards a disaster!
Retirement is the dream. Freedom and independence and more importantly, time. You will have all the time in the world during your retirement years. You can visit those dream places you thought of visiting in your early adulthood or teenage years.
If you want to spend your retirement years joyously, then you definitely need a retirement plan charted out right now!
In this article, I will be covering different elements which are essential in order for you to be certain on your retirement plans.
Determine the total amount
The first step in saving up for retirement would be to determine the sum total you would be needing to spend your retirement years. There are certain elements to which you need to pay close attention to.
The general idea is to retire with 80% of your pre retirement income. This strategy will work out fine but there are other aspects which need to be accounted for too. If you are planning to live your retirement years in a big house, or you are planning for different tours, then these expenses too have to be accounted for in order to determine the final amount. Inflation too has to be considered. Calculating future expenses without considering inflation would result in a greater deviation from what you have planned for the future. More importantly, the inflation in the cost of healthcare should be taken care of.
Start by calculating your living expenses per year. Another aspect of saving up for retirement is that your target amount for retirement would be 25 to 30 times of your total expenses for a year. If your annual expenses amount to ₹ 13,00,000/-, then you would be needing ₹3,90,00,000/-(3 crore 90 lakhs) . if you estimate a number less than your actual requirements, then you will suffer badly in the future, but if you estimate a number which is way more than what actually is required, you will spend more years in making up for that sum and retire much later. Do read my article on inflation
So, calculating the accurate sum required for you to retire is crucial. If you are wondering how to come up with the rate of inflation for the future, visit the official website of the Reserve Bank Of India. The link will directly take you to the inflation rate chart, where you can easily find the inflation rates prevailing in India for the past 10 years.
Adjust your current budget as per the requirement
You need to cut back on your expenses. Believe me, spending less will not affect your life in a more negative way. You actually will live much more peacefully if you live in a simple way. Move into a smaller house, or move to a much cheaper area. Housing expenses make up for the biggest chunk of everyone’s expenses. A big house will come with a big maintenance bill. The big garden it contains, or the expensive ornamentations and more importantly, a huge electricity bill. Maintaining its exotic garden and its ornamentation would drain a bigger chunk from your savings.
Opt for a cheaper car, or buy a second hand car. Many websites are selling used cars for a very cheap rate and the cars are in good condition according to the reviews. If you are a person who needs to travel alone frequently, opt for a motorcycle, and do look for a used one in good condition, in this way you will save up good on transport. Use public transport more often or opt to work from home if your employer is offering such a possibility.
Working from home has boosted the rate of productivity for many professionals across the world due to the atmosphere, flexibility and relative peace. By opting to work from home, you can easily move into an area which is relatively far away from the city centre and hence the rent charges will be much cheaper there. Working from home will cut down your travel expenses significantly.
Make your own food instead of preferring to eat out or take out often. By opting to make your own cup of coffee and lunch etc will not only help you save up money, but will also keep you healthy and happy.
Unsubscribe to OTT platforms and other kinds of subscriptions such as salon memberships or shopping mall memberships which you don’t use often. Opt to share the OTT platform subscriptions. Platforms such as Netflix allow users to share the subscription with their friends and family members.
Work with a financial advisor
You will face a situation where you have less time to make up for your retirement fund or you have more time to spend during your retirement years. You will also face difficulties when it comes to investing your money in the right places. Unless you have some kind of expertise in the field of investments, it is always better to hire the services of an advisor.
Financial advisors will guide you through various elements and will create effective road maps for your savings requirements. Look for financial firms and advisors near your neighbourhood. Talk to your friends and colleagues and see if they know any financial firms or advisors.
Look up on the web for more reputed financial firms in your country and see if they are offering their services through online means or if they have their branch set up in your city.
Gain Independence from Debt
If you are having more debt obligations, concentrate on how to meet those obligations as soon as possible. Paying for different debts will eat away money from your savings, making it much more difficult to retire early. You might have different kinds of debt, such as mortgage, bank loan, car loan, student loan, credit card payments. Your first priority should be to pay off such debts.
Cancel your credit cards. People who have credit cards tend to spend more than the people who do not possess one. This is because a credit card gives you the feeling that you are not overspending while you are in fact, overspending. And you are actually paying more for the products you purchase with credit as you will be paying interest along with the actual cost of the product or service.
By eliminating any kind of debt obligations, you will be sprinting ahead much faster with your savings plan.
Cut down on Expenses
Cut down on your monthly expenses. Live a simple life and save more for your early retirement. To know more about how you can save money by cutting down on expenses, read my blog post on how to save money and live on a tight budget.
Your House
As mentioned before, opt to live in a smaller home, or move to an area where the rent charges are much lower. By opting for a bigger house, you need to pay a big bill for its maintenance. Opt to work from home, in this way you can easily move to an area far from the main hub of the city, in this way you will be saving a lot on the rent charges. Living in a house which will leave you with less money for your retirement is not living rich. The term used for the situation when you buy a house which will drain a hefty sum of money, leaving you with almost no money to live up to your lifestyle is “House-poor”. The term does capture the concept well.
Add more streams of income
Do side jobs apart from your mainstream job. Take up freelance work according to your skill set. If you are good at writing, take up content writing freelance jobs. Financial writers, business writers, technical writers and medical writers are high in demand, so start improving your writing skills in line with your specialisation.
Set up a side business and run it after working hours. Do feel free and be flexible when it comes to rotating the side business with freelance work. If you start with a freelance job, that doesn't mean that you have to stick with it forever. Same applies for your side business. Just make sure that you are reasonably investing in setting this side business.
With increasing your streams of income, you will easily speed up the saving process for your early retirement.
Once you are done planning for your retirement fund, commit to the plan and avoid any kind of deviations from your plan and achieve your dream of retiring early and follow your passion.
Visit those dream places and explore the world and know different aspects of life and meet new people and know their cultures. Life is not just about work, it is about exploring and enjoying, spending time with your loved ones and making their lives more joyous.
Comments