Business & Marketing

Creating a Financial Plan For Retirement

Retirement is something most people talk about, but fewer and fewer are able to attain. Inflation rates are up and personal savings are decreasing. Many people are working later and later in life with little hope of being able to fully retire. This doesn’t have to be the case. Here are a few ways that one can start making financial retirement plans.

Start Saving Early

To an 18-year-old, retirement might seem like an eternity away. What’s the point of saving now if there are another 50 years of work ahead? This is a very easy trap to fall into and understandably so. The “have it now and save later” mentality is far more fun due to instant gratification. Let’s do some math though. Say someone saves $100 every month starting at the age of 18 and works until they are 65. Generally, there will be interest earned, especially if someone makes investments. For the sake of making the math easy though, we will say there isn’t interest. 47 years of working times 12 months in a year is 564 months. 564 times $100 is $56,400! Compare that to an individual who doesn’t start saving until they are 35 years old and works until they are 65. 30 years times 12 is 360. 360 times $100 is only $36,000. That’s a difference of $20,400!

It is often easier to save money earlier on in life. A family of four has a lot more expenses than a single individual. We used $100 a month as an example, but many people can save even more. The financial gains will be more substantial the earlier in life one starts saving.

Make Wise Investments

If one has money greater than the cost of living, there are a plethora of ways that money can be used to earn additional money. A simple savings account is a great place to start. While interest rates are generally relatively low, this is a safe way to make a bit of extra money with the ability to remove the account’s balance at any time. Certificates of Deposit (CDs), as well as bonds, are two additional ways one can make money. These two options are both investments that require the money to be kept in the investment until it matures. This means that until a set future date the money is unavailable. CDs are relatively safe, but bonds are riskier and often carry a higher interest rate due to that risk.

Stocks are an extremely popular way to invest money. While one can do this on their own, it is generally wise to invest with a company that monitors the stock market. Based on observations and data that they have compiled these companies strategically invest money in a variety of investments. While there is a commission paid to the investment agency, the risk of losing everything is a lot lower. The thrill of putting a large sum of money in one company with the potential for huge rewards is indeed exciting to think about; however, the risk of losing it all makes using an investor a lot safer option.

Live Below One’s Means

An obvious statement is that the less one spends, the more one has. Setting a budget that uses less money than what is earned frees up money for saving and investing. This doesn’t have to be taken to an extreme to be effective. Let’s use another example. If someone spends $10 a day for lunch five days a week that’s $50. However, if that same person goes to the store and purchases food to make their lunches for the workweek and spends only $25, that’s $25 that now is freed up to use on something else. If that individual decides to save that money each week then they will have around $100 each month. That is just one example of how expenses can be cut. Just because it can be afforded, doesn’t mean that it’s needed.

While being able to retire is not a guarantee, it is a lot easier to attain than some would think. Start saving sooner, invest some money, and pack that bagged lunch. The long-term result is worth the extra work and self-discipline.

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