Dreaming of retirement is simple. Sometimes life makes executing a plan for retirement complicated. Many things are beyond your control, like what interest rates will be, how the stock market is performing, perhaps even how much money you earn. However, your retirement is ultimately your responsibility and so, you have got to take charge.
There are two main tenets to getting ready to retire. The first is to fully accept what you can control about your finances, such as managing your household budget and understanding your options. Crossing your fingers and hoping to win the lottery is not a good management strategy. If managing your finances on your own is daunting, you may consider working with professionals who specialize in retirement income planning. They can assess your financial situation and determine the right investment plan or an income model designed to protect your financial health before, during, and after retirement.
The second is to be intentional about what you do with your money. Mostly, owning your retirement before you retire is about having the right attitude and being willing to practice. Here are some basic ideas to embrace on your journey to owning your retirement.
Pay Off Your Debt
Debt has two detrimental effects on your retirement plans. You lose money. Every time you make a payment with interest, you are paying much more for that item than the purchase price. Did you know that when you buy a house with a 30-year mortgage at 5% interest, you actually wind up paying twice the purchase price of the house by the time the mortgage is paid off?
It’s even higher for items purchased on credit cards. If you make a purchase on a credit card that has 18% interest, which is about average, and then make the minimum payments, you actually wind up paying 3 to 4 times the purchase price of the item. So much for getting a good deal on a sale! What’s even stranger, it will take you so long to pay it off, that the item may not even work anymore by the time you are done paying.
The second detrimental effect is that it weighs on you. It limits your ability to make positive choices with your money. So, pay off debts as fast as possible. Don’t think of the minimum payment for a mortgage, loan, or credit card as what you owe each month. Think of it as what you owe if you want to be stuck paying way more than the item is worth.
With this goal in mind, consider using a debt payoff strategy. Generally, there are two techniques that you can use.
- Debt Avalanche Strategy: It requires you to prioritize your debts with the highest interest rates.
- Debt Snowball Strategy: It requires you to pay your smallest debt and work your way up until all your debts are paid off.
Besides using a debt payoff strategy, finding a side hustle can be an excellent way to help you pay off your debts. The money you receive from your part-time jobs can be used to get you out of your debts in the fastest time possible.
Thankfully, in today’s digital world, many online jobs are available to those who are looking for money. For example, if you have a passion for blogging, you can write blogs for companies in exchange for a fee.
Most households are baffled as to where their money goes every month! Keeping a weekly or monthly budget will help you really think about your expenditures. You will know what you can afford, and so make intelligent choices about things like going out to eat, buying new clothes, and upgrading your old TV.
Starting a household budget takes some time and thought at first. Then, it takes some discipline to get into the routine of it. However, it doesn’t take long for the way you think about your money to change. Those first few months spent developing the new habit of collecting receipts and entering them into your budget tracker will ultimately feel really good. You are more likely to continue to monitor your budget than not because watching the numbers in your bank account grow feels empowering.
Get comfortable talking about money. Money and money management is such an important part of all of our lives, there is no reason to feel awkward discussing it. There are some social taboos about talking about how much you earn and how much you spend. That’s fine. Take the dollar amounts out of the conversation and just talk about the concepts. The more comfortable you are talking about finances, the more support you will have among your peers and possible mentors, and the more confident you will feel about your ability to navigate the financial world.
Understand Your Investments
You are probably like most people. You need help knowing how to invest your money wisely. That being said, you should never just hand over your money to an expert and simply hope for the best. Stay involved. To help you get acclimated to working with financial professionals, look into financial planner software that is built for ordinary people who want to work with professionals. Good financial planner software will help you understand your household budget, set realistic savings goals, and help you conceptualize what kinds of investments will work best for you.
Aside from using software, creating a solid investment plan can be a good way to prepare for retirement. Consider diversifying your investments by spreading them out in various sources to curtail potential losses. This aims to safeguard your current income from market volatility and your future income from the risk of inflation. Remember to evaluate your needs and the risks that you are willing to take. Based on these parameters, you can decide on which kinds of investments you are ready to venture into.
Make Back-Up Plans
Life happens. All the planning in the world can’t prevent the unexpected. There is no need to panic, though. Just think about some backup plans, in case your plan for retirement hits some speed bumps. Think about what type of work or income you could generate after you retire and do some preparation for it now. For example, if you would love to do more gardening when you retire, educate yourself now, so if you need a job later, you are ready to work in a nursery or greenhouse.
Making a plan for retirement is within your reach. You just need to adjust your thinking toward your goals.