There’s nothing like getting your head around your personal finances, an immediate calm descending once you feel like you’re in control of at least something in your life.
But getting there takes a lot more work than many like to put in.
The first rule to work with is that when preparing for retirement, it’s never too early to start saving.
Then, there are various aspects to focus on during the first two decades of working:
Your 20s is the time to work towards paying off any outstanding debts, such as student loans, etc. While this can make saving in your twenties one of the toughest tasks, it will be well worth it in the end.
Then, once you hit your 30s, your focus might shift towards buying a home or expanding your famdamily. Your income should then be divided into achieving those goals, as well as continuing to add to your savings for retirement.
All the while, during both your 20s and 30s, there are a few other key factors you should be working towards. TIME dropped these “essential retirement moves”, so that by the time you want to stop working, you’re pretty sorted:
Ask for more in pay
Why it’s key • What you earn in your first decade on the job has a lasting impact on your wealth. The typical worker’s wages grow the most between ages 25 and 35, according to research by the Federal Reserve Bank of New York. A pay boost when you’re 25 adds up to more in lifetime earnings, a study by researchers at Temple and George Mason universities found.
How to do it • Whether you’re fielding job offers or angling for a raise, negotiate. First, speak up. Only 37% of millennials have ever asked for a raise, reports salary site PayScale.com, but nearly half of those who did got the desired hike. Don’t wait until review time. Put in your request right after you’ve pulled off a major project.
Be dogged about paying low fees
Keeping investing costs down is always smart. Locking in low fund expenses when you’re young is especially rewarding over time. For example, if you invest $1,000 a month in a retirement account for 30 years, you’ll end up with $761,000 assuming average mutual fund fees of 1.3% a year and 6% annual returns, according to Bankrate. With an index fund’s average 0.5% expense ratio, you’d have $874,000. Better yet, pick an ultra-low-cost fund that charges just 0.2% a year, and you’ll retire with $921,000
Balance saving and student loans
Why it’s key • A third of millennials say that student-loan debt is delaying saving for retirement.
How to do it • To free up cash, switch to an income-based repayment plan if possible, which caps loan payments at 10% of income. When you start earning more, you can step up repayments to be debt-free faster.
Get to know the future you
Picturing your future self can put you in a savings mind-set. When Prudential Retirement installed a photo kiosk to let workers see what they might look like at 65, the number who enrolled in the retirement plan or hiked contributions rose 60% from a year earlier.
Get a retirement fund
Whether its through your company or investing in a personal retirement annuity, both means have wonderful tax benefits, which you need to take into consideration when evaluating your personal tax situation.
At the end of the day, getting your financial affairs in order needn’t be a daunting task.
Partnering with the right financial advisor to help protect and build that wealth is imperative, which is why it adds value to speak to the likes of those at Consequence Private Wealth.
Based in Newlands, they will give you relevant and reliable financial advice as they believe that the consequences of decisions made today will bear fruit over the years based on the sound principles applied at their inception.
Sounds about right, doesn’t it? Start now, retire rich, live the holiday.
While we have you here – to help you with another aspect of your finances, Consequence Private Wealth invites you to their second round of Wellness Points sessions for 2017.
Here’s what we know:
The sessions will be held at Consequence Private Wealth’s office: 1st Floor, Newlands Quarter, corner of Dean and Main Streets, Newlands (above Rock Sushi Thai and Vida e)
Dates and Time: Tuesday 24th and Wednesday 25th OCTOBER 2017; 8AM to 4PM.
Cost: Fitness Assessment is R375 pp (can be claimed back from your medical aid savings account), and payment in cash is preferable please. The Health Check is free.
Vitality Points Available: Fitness Assessment: Up to 7 500. Health Check: Up to 25 000.
It’s a pleasure.
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