Too Early, Too Late?

This time, it’s about the Big “R” – Retirement Planning, my friends.

Many people believe that planning for retirement is only for people who are in the mid-cycle of their productive years i.e. in their mid 30s onwards. I choose to disagree and I’ll tell you why…

Once you started to have income (start receiving money), it’s time to start saving for the future, from as early as you received your first angpow (money packet one receives on special occasions). You may want to save for college, the first car or house, wedding, honeymoon, having kids, retirement, etc.

If you wait till you are in your 30s or 40s, most people, by then, would be in the “Sandwich Club” – which I called, for people who have to take care of their children and parents. In this generation, I dare say most would have a string of expenses with limited income. Generally, one would have a young family, with commitment to pay for children’s expenses, mortgage and car loan to service, insurance premiums, contribution to parents, medical bills, credit card payments, maid, and the list goes on. You would be lucky to even have surpluses at the end of the month! Now, you wonder how you are going to save for your Retirement when you can hardly have any surplus?!

First thing first, you have to get down on paper and pen to list all your fixed expenses (which you must pay the sum every month – mortgage, car loans, school fees, etc) and your variables (dining out, groceries, vacation, etc). Study your lifestyle and start to identify areas which you could make some adjustments to your variables. I know it’s like pulling your wisdom t00th without the painkiller. It’ll be painful for a while and over time, you’ll survive, trust me. When there is a will, there is a way. I’m sure we always want to give the best to our children. Actually, the best for the children is not the material things which we would like to shower upon them. You know what it is ~It’s you and your time. If you make some adjustments to your lifestyle and purchasing behaviour, you can actually save quite a sum and that would give you your surpluses to save. It is alright to try to save as much or as little (if you don’t have much to start with) – so long, you take the first step towards creating the habit to save.

Then, we shall look at your savings and/or investments (if you have been doing that all along). Are they growing at the rate that it could hedge against inflation? If your savings growth rate is lower than your personal inflation rate, your money is shrinking, ooops! Recently a friend sat down with me and talked about bulk of her savings are in a very low-interest generating savings tool. She is afraid that her money is shrinking fast. She is so right! She wants to take action to ensure that her golden nest is secured. I’m so glad that she has the foresight to want to make changes. Bravo!

Couple of years back I attended a powerful seminar in Singapore called the Millionaires Mind by T.Harv. He made saving quite fun and rewarding. He talks about using 5 money containers to save in:

1. Financial Freedom Account (FFA) – for retirement

2. Long Term Saving – for long-term goal, e.g. for your first house.

3. Education – for buying anything educational, e.g. books, magazines, etc

4. Play – for rewarding yourself, dining at your fave restaurant, buy that dress, buy that watch, etc

5. Gift – donation

Then, last year, a dear friend told me that it applies to children too. Why haven’t I thought of that?! Lynnda started this way of saving with her children and it worked so well. I then came home and started to get 5 containers each for my children and got them to save their change from the days’ pocket-money, their angpow, whatever they received at any time. When they want to buy a toy or a book, I let them, provided they have enough in the container – no loan allowed. This is really great! Thanks, Lynnda!

For people who are not in the habit to save, try this method. It is not about the amount but the habit. Once the habit kicks in, start doing basic calculations and work on the amount to save. The younger you start saving, the longer time horizon you have and you don’t have to save as much as people who are older and have shorter time horizon. So, it pays to save early.

For those of you who have just started working, please save at least 10-20% of your take home pay and you may spend the rest of it. Pay yourself (save) first then pay others. For homemakers, you could still save for yourself. I assume your husband would provide a fixed sum of money for you to take care of domestic/family expenses including your pocket-money.

To enable you to be aware of your spending, you should work with a budget listing. If you don’t have one, start today. Yup, now.  Start recording all your expenses for a month to three months to see your spending pattern. You would be in for a huge surprise at what you arrived at. From here, you are able to identify what are your fixed expenses and what do you spend most for. Are they necessary? Are they needs or wants? It is good to be aware of where your money has disappeared to.

I shall leave you to do your “homework”. All the best!

For those of you who like what I have written so far, why not subscribe to my blog. You’ll get to read each post while it is still “hot” from the “oven”! More to come…..

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