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The earlier you start saving, the easier it will be. Starting late, though? Don’t worry. Here are my top tips to save for retirement.
One thing you don’t want to think about when you first start working is to save for retirement. You think you have years—decades even—to do it. Why do you need to think about doing that right now? Well, the sooner you start saving the better.
A lot of us don’t really start thinking about it until our 30s or even 40s. We should be thinking about it in our 20s. This takes off a lot of strain to save, even if we’re not making the income we will do in the future. The problem is surviving on minimum wage can end up being a problem for saving.
If you do end up waiting until you’re in your 30s or 40s, don’t panic too much. Yes, you’ll have more work to do, but you can still manage it. Here are my top five tips to save for retirement at any point in your life.
Know how much you’re going to need to save for retirement
The first place to start is knowing how much you’re going to need when you’re in retirement. There are calculators to help with this, and a good financial advisor will also help you figure it out.
This is also known as the Financial Independence Number (FIN). It’s the number you need to get through the whole of retirement, which will just be a rough estimate as we have no idea how long we’ll actually live, right?
The number is based on the amount you want to live on each month throughout all the years of retirement. With a good financial advisor, you’ll get a real number for the future based on expected inflation rate. It will be daunting when you first see it, but it’s important to have this so you know where to start.
While this is the ideal number, don’t panic too much about it. If you can’t save enough to get there right away, there are some changes you can make both for the future and for right now to help. Don’t get disheartened and then not start saving at all.
Plan to save as early as possible
You do want to save your money as soon as you can. This isn’t going to be easy at first. You won’t want to at first. Who wants to think about their need to save for retirement when they’re only just starting out in the world of work? Your 60s seem so far away when you’re in your 20s.
Well, it’s worth saving young. You’ll have less to save each month to get to that large number at the end. If the number at the end needs to go up, you’ll find it much easier to add to that in the years to come when you save early.
Didn’t start saving in your 20s? Don’t let that put you off now. It’s important to start saving as soon as you can to relieve some of the burden. Even if you can’t save the full amount each month that’s recommended, saving something is better than nothing at all.
Pick up a side job to save all that money
It is scary not being able to save enough for retirement*. There are a lot of people out there just like you. They haven’t thought about it until it’s a little later in life, and now they need to work hard to do so. How do you start when you don’t have enough to save for retirement?
The first step is to save what you can. From there, you can pick up some sort of side job or hobby that will make you money. Some people will take on a part-time job at the weekend and funnel all that money into retirement. Others will look at starting a side business in something like soap making, writing, or photography to make extra money each month.
All that money will go directly into retirement. If you do it right, you can put that money in retirement to save for the future in full. All the rest of your regular income can then go on what you want to spend now.
Automate the savings for your retirement
Automation is your best friend. If you say you’ll move money on the 1st of each month, you can end up putting it off one month to the next. You forget, or you don’t think you’ll have enough money. Or maybe it’s a vacation and you don’t want to think about it until you’re back home. By then, you’ve missed out on putting money into your investment.
When you automate, it goes in there, well, automatically. There’s no need to think about moving the money yourself. You don’t have to worry about if the banks are closed one day. That money will still make its way where it’s supposed to.
Plus, with automation, it’s all set up. There’s no need to worry about sending the money to the wrong place one month. It’s so easily done with one account number being off.
The best thing you can do is automate so the money goes each month. Set and forget.
Get a good financial advisor to help you
Finally, you don’t want to do this alone. I know there are plenty of people on Reddit who will recommend that you avoid financial advisors. There are now plenty of systems out there that will allow you to invest yourself.
The problem is you may be worried about taking that first step. You know you could do it that way, but you’re scared to take the first step. This leads to you putting it off for months and maybe years. There just isn’t all that support and advice online unless you’re willing to pay money to learn.
Why not trust someone who has been through the licenses already? And yes, financial advisors need to go through licenses to be able to do their job. They need to keep those licenses in place. If something goes wrong because of their mistake, there’s insurance to protect you.
Before I started working in investments, there was no way I would have done it myself. I had my own financial advisor. I wanted someone who knew what they were doing, and I was willing to pay just a tiny bit extra to have that. I also found based on research into the likes of Wealthsimple and Questrade that my results ended up being a little better by trusting someone knowledgable to do it for me.
What are you struggling with when it comes to saving money? What questions do you have to save for retirement? Share your thoughts in the comments below.
Get in touch to see how I can help you save for retirement.