Not only experts advise ordinary people to save money for their future retirement, the government also emphasizes on it from time to time. "We are talking about the fact that citizens who work must also take care of their own future," – these are the words of most of the finance ministers in the world. Obviously, it means that the state guarantees people a certain basic minimum for a living, but the rest of the amount needed for decent living conditions existence must be provided by citizens.
In this regard, are there any ways to flourish while being retired? The answer is written below.
Write Paper to Save for Retirement in Advance
One of best ways to save money is to keep track of expenses. How to do that? Just take a clean sheet of paper and try to write down the spheres on which you spend lots of money. Is it food? Rent apartment? Shopping? Just evaluate which sphere takes a huge amount of money and try to describe the particular things that are the lion’s share of your budget.
According to American experts, the written form is considered to be the best form for analyzing any issue. It is explained by the fact that the left hemisphere that takes part in the writing process is responsible for analytical skills as well. That is why it becomes easier for us to analyze a particular issue when it is written on a clean sheet of paper rather than told by someone.
On this matter, start writing short essays that will describe all your expenditures as soon as possible. By the way, you can get this essay about you in a very short time by appealing to our professionals. It sounds like a solution, does not it?
How to Plan a Retirement?
Any long-term investments must be carefully planned. While a student, you need to include a homework help service into your monthly budget, and that’s all! But the older you get, the more complexed planning of your finances becomes. You need to take into consideration all factors – profitability of assets, inflation, country, currency risks. Obviously, it is complicated for a person who is not dedicated to financing. Therefore, the first step is a personal financial plan (PFP), drawn up with a professional financial adviser. Such a plan will encompass the goal (for example, "getting passive income in 30 years"), the amount of current monthly income, the assessment of opportunities (how much you can save monthly / quarterly), the possible debt load (for example, if you have a mortgage loan), your risk profile (willingness to risk a portion of the investments in order to achieve greater profitability in the future), as well as macroeconomic risks and, of course, the instruments of achieving the goal.
The retirement plan should be very balanced, strategic, and it should not respond to the current investment mode. When choosing the method of accumulation, it is worth remembering the basic principle of investment: the higher the potential profit is, the higher the risks are. At the same time, it is important not to invest only conservatively since retirement funds have a great investment horizon, including the general growth of life expectancy. By maintaining a significant share of more risky instruments, such as stocks, you will be able to get ahead of inflation in a long-time period. But the choice of such a strategy must be done with an experienced financial specialist. Let's try to collect a balanced model of the pension savings portfolio.
But before coming up with a retirement plan, you need to master the art of creating plans in general. If you are aware of how to make a proper plan, it is great; but if not, go here and find out the ways of making successful plans.
There is merit in sending 30% of retirement contributions for fixed income instruments. The entrance threshold is minimal; the deposit amount can be 5 thousand dollars.
A bank deposit is what most people are accustomed to, and it is quite understandable and generally associated with reliability. But there is a negative, relatively low profit that can be triggered by the level of inflation.
The deposit is a necessary conservative element for long-term investments, but it must be made in a reliable bank with the possibility of regular insertion of funds and remote access to the account. It is necessary to regularly monitor the best offers on rates and regularly replenish accounts.
Another 30% of the regular deductions should be directed to life insurance. The key point of such an insurance is that you are paying regular contributions to the insurance company for a long time (up to 25 years) to receive a large amount by a certain date. The amount of the monthly contribution to the funded insurance programs is set individually, depending on the insurance conditions. The minimum initial deposit (entry threshold) in such programs starts from a thousand dollars.
But perhaps the main problem in the formation of personal retirement capital is self-discipline. At first, you think that you can always send some amount of money on a monthly basis, but in practice, it is far from the point. But remember: under the terms of the life insurance program, insurance needs to be regularly paid and on time, and delays in payments can lead to early termination of the contract and a loss of income.
We have defined the conservative "core" of investments in the future retirement. Having deposits and life insurance programs, we can send about 40% of funds into more risky instruments.
Many Americans choose shares of equity funds for long-term investments. Despite local fallings of shares, the capitalization of companies has grown over the years, and the value of securities increases as well. On long-time horizons (from three to five years) mutual funds show the best results. What is left, is to choose a suitable fund and regularly purchase its shares.
There is also an opportunity to open individual investment accounts (IIA). With them, you can buy the same shares of unit investment funds, or simply bonds of reliable companies for up to 400 thousand dollars annually. It allows receiving investment profit and a tax deduction of 13%. In fact, such a compensation is already an income exceeding the standard bank interest and inflation.
Investments in stock instruments through individual investment account can be made without any special risk, providing a stable annual profit. The main thing is to submit your declarations in time, adhere to your personal financial plan and understand that your future depends on your reasonable actions in the present.
Learning to Save Money
I would advise starting with the formation of an unconditional habit of saving a small amount from each salary. Start to keep the daily schedule of incomes and expenses having given a place to savings, investments. Set aside at least 10% of your income.
In addition, it is worth considering that with the development of your career, salaries will also grow, which means that there will be more opportunities for savings.