When we are young, we don’t really think about financial planning for retirement. However, there are some good reasons why this way of thinking is wrong.
If you’re a millennial (people who were born in the 80s or 90s), chances are that you’re still not well-versed in the art of saving money. It’s likely that you haven’t thought about financial planning for retirement. Many millennials often ask the question, “at which age would be the best to start saving money for the future?”
It is already established that money is the currency we use to pay for things in this world. Whether you’re paying your bills, paying your debts, or paying for your food, we all need money to cover that.
In today’s article, I will go over the reasons why you should think about financial planning for retirement even when you are young. Read on to find out the best answer to the question above.
1. Why Should You Save?
Before I answer the question above, I must first answer why there is a need to save cash. We all know that money is what we use to buy things, right? And cash is a finite resource. That is why you need to continue working to earn more of it.
The reason why saving is crucial is because you want to have that cushion and you want to have something in your reserves so that when you retire, you have something to spend.
No matter how we take care of ourselves, we will all retire at some point. Thus, if you didn’t invest your money in meaningful things like having your own business, for example, then you will go broke when you stop working.
2. When Should You Start?
So, when is the best time to start saving for your retirement? Actually, the answer to that is “as soon as you start working”. Oftentimes, when people land a job, saving for their future is the least of their concerns.
They’re more focused on paying their previous debts, credit cards, and others, but rarely do they ever think about their retirement savings. There are many benefits if you start saving early. One would be that the money you’ve saved will compound interest yearly.
So, when you start saving in your 20s, that will compound each and every year. If you start saving, say, $8000 per year, that could build up to $1,000,000 by the time you retire and so on. This, of course, depends on the bank, but you get the gist.
Although it is never too late to think about financial planning for retirement, it is best that you start early so that it will start compounding.
3. Financial Planning
Now you know when the best time to start thinking about your retirement is, it is now time for you to think about financial planning for retirement. Basically, structure your lifestyle based on the amount of money you’re receiving every month.
Do not go beyond the means as much as possible. Learn how to budget and make sure you do not exceed that to avoid wasting your valuable resource.
4. Get a Retirement Plan
Most companies offer a 401(k) plan and it is always a good idea to take advantage of that. If the company you’re working from doesn’t offer such, then get another retirement plan to ensure that you’re getting the most out of your savings.
5. Take Care of Your Finances
Although I’ve presented some valuable options for you to save, this is not to say that you shouldn’t spend money on leisure and entertainment. All I am saying is that you have to structure your lifestyle in a way that you can enjoy living your life as well as having enough money to save each month.
Aim to save at least 15% of your income every month; increase it whenever possible. Remember, we all have to retire at some point, so make sure to be smart when it comes to spending.
Although there are other financial options, you can rely on whenever you need more funds, it is still best that you use your own, which is why saving your cash is of paramount importance.
6. Try Your Hand in Investing
Investing your money in something that will grow over time is a great idea. If you can, put up your own business so that you will have a passive income machine.
However, do your due diligence and research about the best things that you can sell so that you do not end up wasting your money in the process. You could also think of investing in the stock market or perhaps in real estate as well as both of them are lucrative options.
7. Pay off Debts
As much as possible, you want to eliminate all of the debts that you have so that you can focus more on saving your money for your future. It is also a good idea to start thinking about your credit. Build it up well so that in the event that you need to take a loan, you will be able to.
At some point in your life, you’re going to retire from work. Having your retirement fund set up and you saving money at an early age is crucial if you want your money to grow.
It is never too late to start saving, but if you can, start as early as possible.