When trying to build up your retirement fund, it is best to start as early as possible. After all, this means that you have more time to reach your financial goals.
The longer you put it off, the less time your assets have to grow. If you put it off for too long, you may find that you might not have enough cash to see you through your golden years with the lifestyle you wanted.
Getting a late start is not uncommon, but it is also not ideal. However, it is not the end of the world either. It is still possible to build a comfortable retirement if you’re savvy about planning. Here are a few tips to get your financial future on the right track when you are behind in the race.
Estimate what you will need
Knowing what your target number is makes it far easier to plan your retirement and start saving. In order to find out how much your target should be, the first thing you should do is spend some time thinking about the retirement lifestyle you want. Try to be realistic especially for those who are trying to play catch-up. Ask yourself questions like:
- Will your retirement lifestyle be like your current lifestyle?
- Do you want to move to an area with a lower cost of living?
- Do you have any outstanding medical issues?
- Do you want to spend your retirement travelling?
- Do you want to splurge on your hobbies?
By doing this, you can get a foundational sense of how much money you will generally need to live a comfortable retirement.
Establishing a retirement savings target is relatively easy, but hitting that target will take a lot of hard work. For the late starters out there, you will need to take an aggressive stance when it comes to saving and invest strategically to accumulate enough money. Then, when you finally hit retirement, you will have to keep a fiscal mind in order to extend the longevity of your retirement funds and attempt to navigate around all the unexpected issues that may pop up during retirement.
For this, you can utilise iMoney’s Budget Calculator, a simple and easy to use tool that can help you track your monthly spending and budget in a single neatly summarised report.
Get professional assistance
You might balk at the idea of spending more money to get someone to help you with money, but truthfully, no one knows money best like a professional financial advisor. They can quickly help you to get your retirement portfolio back on track. Said advisors can help you get a handle on your day-to-day finances, project how much money you will need at retirement and formulate a plan to get you where you need to be.They can also help clients model what a realistic spending goal looks like and help you to understand what your health care costs could potentially be.
Clear your debts ASAP
Ideally, the money spent on interest expense should be funneled into a retirement portfolio. This will allow you to make better use of compounding interest to grow your money and settle outstanding payments. Unfortunately, debts do not magically disappear. You must make the effort to form a strategic plan to eliminate as much debt as possible.
One popular way to eliminate debt is referred to as the “snowball method.” A snowball that rolls down a hill will slowly gain momentum while getting larger and larger. Just like the snowball, you should start off by paying your smaller and more achievable debts first. Try to pay these off as fast as possible. By doing so, you gain a massive psychological advantage and even more confidence to tackle the bigger and more problematic debts.
Form a budget and stick to it
This may seem like basic advice, but it is even more important for those who are starting out late. It is absolutely imperative for late starters to identify their sources of income and each expense category where money is being spent. Then, monthly estimates for each item need to be lined out based on historical experience and any anticipated changes.
Ultimately, the goal of your budget is to maximise your savings potential and instill a sense of discipline. By regularly reviewing the areas where you spend money, you can determine what needs to be cut in order to optimise your financial position. If you are struggling to formulate a proper budget, you can try using iMoney’s aforementioned Budget Calculator, or you could check out this article on which budgeting apps to use.
Consider a side hustle
A side hustle is a great way to earn a little extra for your savings, especially for the late starters. Not only will it increase your cash flow, but it may also provide you with a part-time job in retirement. This may not appeal to everyone. After all, some people may have to work long, tiring hours, and may want to keep all their time off for themselves. However, if you can find a way to monetise your hobbies, or things you like doing on your time off, then why not? If you enjoy baking in your free time, you can try opening a made to order cookie or cake business.
Downsize your lifestyle
As we get older, our needs and lifestyle changes. For example, we may want to own a big home in order to raise a family in a comfortable environment full of amenities. However, as we approach our golden years, having such a large amount of space to maintain and care for can get more tedious, especially with the natural deterioration of health as we age.
This is one of the reasons why downsizing your lifestyle is one of the best ways to conserve your savings and finances. Once all your children have become independent and move out, consider selling your large home and use the earnings to purchase a smaller house or apartment, funneling any leftover money into your retirement portfolio. Alternatively, you could hold onto the original home and rent it out to generate some income.
Other than this, other downsizing strategies can include cutting back on non-essential spending, such as new cars, golf clubs, clothing, etc. While it is understandable that you want to spend your hard earned money in retirement the way you want to, sometimes, you may have to take stock of your finances and plan around your savings, especially if you start saving late.
The thought of trying to accumulate retirement savings late in the game can be a daunting task, but it is not just a hopeless dream. As long as you have a proper budget and financial plan, you can always work your way towards a more fulfilling retirement.
