If you are a working professional, retirement is probably the last thing you may think about. But you cannot put off the idea for long, as you may have to plan your finances accordingly for the golden years of life. It is the time when you dream of relinquishing all your responsibilities and enjoy a peaceful living with your loved ones, pursuing hobbies and accomplishing your goals.
However, to live the life you imagined for yourself, you must have sufficient savings for yourself. And when it comes to saving for the future, the earlier, the better. You can leverage the benefit of time and build a large corpus and allow your money to grow over time with a compounding effect.
To let your money and investments grow, you must do your research well and plan your finances well so that you can be financially independent even after you hang your boots and have a fun retirement life. Here are a few vital tips that can help you in your endeavour.
- Create a monthly budget
One of the best ways to save for your retirement during your working years is to prepare a budget. List down all the income and expenses you incur every month. It is a wise idea to set aside a small portion of your income for emergency expenses.
A good thumb rule is to consider the expenses only after setting aside a fixed amount for savings and using only the balance amount to manage your costs. This way, you can be assured that you limit your unnecessary spending and save a little for the future, i.e., retirement. A small amount of savings every month can eventually become a substantial corpus.
- Reduce your expenses and start saving early
Focus on savings. But it is easier said than done. Even after you retire, you may still have certain unavoidable expenses like rent, healthcare, utility bills, etc. But there is a way to reduce your spending. Like you can limit your spending on eating out, shopping, entertainment to a reasonable level and direct the amount towards your retirement plan.
You may have heard, ‘The early bird gets the worms.’ So, just by beginning to save early, you will have plenty of time to build a corpus. But savings does not just mean keeping your hard-earned money in a savings account. A savings account won’t give you inflation-adjusted returns.
Instead, you must focus on investing your savings in various money market instruments like mutual funds, NPS, PPF that offer valuable returns and let your money grow.
- Have more than one income source
While you may save money and invest in different pension plans to build a retirement corpus, you must also think about generating an alternative income source, especially after you retire. Indeed, you would want to relax and not worry about work post-retirement. You must also be practical. You must ask yourself if you have enough savings that could last for the rest of your life?
Of course, you can pursue your hobby and take things easy, but you can use your spare time to find an alternative income source. For example, you can take up some freelance jobs or find part-time employment. You can even use your skill and hobby to make money. If you are good at arts, you can probably start an art class. This way, you will have a steady income, and you can stay away from digging into your savings as soon as you retire.
Now that you are aware of the various ways to enjoy a fun retirement, start thinking of your golden years now and align your financial goals accordingly so that you can have sufficient savings for the future.