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We all think to retire early, but situations and sometimes our own disinclination to plan early for it blurs the chance.

Most of us do not want to compromise on current lifestyle, and therefore, never cut on the extravagant ways of living.

However, most of the young professionals fail to comprehend that the early you start, the better you can save and that too without any stress.

Making mistakes in the early phase of saving is inevitable, and therefore, my efforts in this article are to point out some frequent slip-ups made by the young professionals.

1. Accumulation and Distribution

To make sure that saving for retirement does not seem stressful, you should go for Accumulation and Distribution. Accumulation is that phase where a small but fixed amount is saved over the years, and under distribution this amount is allocated to different financial instruments that will serve the purpose. Both accumulation and distribution have to be done simultaneously, doing one and not the other will not serve the purpose.

For instance, suppose from your monthly salary of $50k, you are able to save $10k a month after paying your expenses. From this 10k (your accumulation), if you are investing part of that amount in financial instruments like health policy, life policy, bonds, real estate etc., it will mean you are distributing what you accumulated.

A regular accumulation and a timely and prudent distribution are the foundation of your retirement planning.

2. A Practical Approach

The best investment advisors, Fiduciary Trust and financial planners will ask you, how much money you need out of your salary to maintain the current lifestyle after retirement. While, majority of the clients do not have any idea, there are others who have very vague thought. Problem arises when the assumption is too high or too low as in the former case the retirement plan would look almost unfeasible and latter idea will not assure comfortable living.

Before, going to any investment advisor, you should do your research. Inflation rate (potential), cost of living, healthcare, travel, eating out and socializing should be taken into account while drawing an estimate.

3. Don’t Ignore Health Care Cost

With age, health issues become recurrent, but we hardly give it a thought in young age. Medical expenses take front stage in the later phase of life. There is no doubt about the fact that medical fee is surging, and you will need multiple times more that what the cost of medical care is today. Therefore, a feasible estimate is advisable rather than some random number. That is why it is always suggested that you should take some sort of medical policy as soon as you start earning.

4. Regular Tracking and Reshuffling of Retirement Portfolio

Markets are subjected to ups and downs and the cycle continues. Therefore, it becomes imperative that you revisit to the portfolio periodically. If you have done the retirement planning and things have changed after that, such as you started a family, spouse got promotion and so on, then it is time to check the portfolio, and do the necessary changes.

5. Stay Out of Debt

This is one of the most challenging goals that take much more efforts to achieve. In the time when banks and financial institutions are trying to woo customers with unbelievable credit schemes and easy installments, not taking unnecessary loan becomes tough. We think why to pay from the pocket when there are options.

Eventually, it becomes a headache and piles up. We get stuck in the vicious circle of loans and to pay all the loans, you need to be in a job, earning enough to settle all the dues. Now, the debts that you have on your head are one of the most important factors to decide how many more years you will have to stick to the job.

6. Create a Retirement Budget

Your budget must include: the money coming in, how much you need to reach the goals and the amount of debt you have. To prepare the budget keep track of the money coming in, and decide on the lifestyle that you want after retirement. You can talk to a financial adviser or planner or use online tools to help you track your expenses. Once your budget is ready, you know what you have to stick to, so you just need to put that into action.

7. Earn Passive Income

To retire early, it is not imperative to have a massive bank balance, but what’s important is to have a continued source of income. And, having a Passive income is the best way to ensure that. Rental properties, a brick-and-mortar or online business are some of the great sources of passive income. In order to earn secondary income you need to make sure that the money is invested right. Better decision would be to go for commercial properties, which can ensure regular income.

8. Continue with Education

Plan your courses strategically to continue learning new skills as this will better your business savvy. Additional education can help you with increased income, more savings and an earlier retirement date. Also, education can help you with a passive income. For example, with right education you can always go for freelancing jobs along with your regular job.

9. Prepare for the Unexpected

Only a few of us go into retirement expecting the worst (grave illness, a natural calamity etc.). Therefore, it is always wise to plan for the unexpected, so that you are not caught off guard later. Just putting your money in saving account every month or investing through fixed deposit is not the most intelligent way to save for the retirement. It is better to consider different retirement plans, insurance schemes that offer cover for the unexpected.

10. Stick to Your Plan

This could be one of the most challenging part, but is also the most important one. We humans do have a habit of reverting to old habits after trying out a new course. But, one has to curb such instincts to ensure that we stick to the plan. Professional help is one of the best ways to ensure that you always stick to the plan.

About the Author:
Elena is a Finance Content Executive at www.csbgroup.com.  She is a passionate blogger and an avid traveller. Outside of work she helps young adults get a better understanding of how they can stay out of financial troubles.

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