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How And Why You Should Save For Retirement Before Your Mid-30s

When you are young, in your 20s or 30s, retirement feels like a looooong way ahead.

Typically in your 20s, the only person you have to spend for is yourself. In your 30s, you will have new financial priorities such as the wedding, child’s schooling, house loans, etc.

If you consider all the aspects of your finances and fast-paced life today however, you will realize that it is the best time to start saving for retirement before you hit 35. Even the strategies to save for retirement are in-lined with the ideal to start saving while you are young.

Here are the 4 strategies to save for your retirement before your mid-30s…

1. PAY OFF YOUR DEBTS

It makes sense to pay off your debts or at least your high-interest debts before you save for your retirement. Since not all debts are equal, pay off your high-interest debts first followed by the lower ones.

2. SET UP A BUDGET

Systematically allocate your income onto different categories and stick to that budget. Do not spend beyond what your budget is for that month. This allows you to save regularly rather than arbitrarily.

3. SEEK FOR AN EMPLOYER THAT SUPPORTS YOUR GOALS

Image Credits: American Advisors Group via Flickr

As much as possible, look for an employer that supports your long-term goals. If your employer offers Retirement or Pension Plan then embrace this company benefit.

4. TRACK YOUR RETIREMENT SAVINGS

During your…

a. 20s

It is best to start saving at least 5% of your income or sign up for your employer’s Retirement Plan. Avoid debt as much as possible and get educated about your finances.

b. 30s

Invest your money and check whether it is in lined with your goals. Increase your contribution to your Retirement Savings while preparing for your child’s school fees.

c. 40s

Make thought-through decisions about your expenses and cut down the unnecessary. This is when you hit your savings to the maximum. By this time you should have at least S$80, 000 to your Retirement Savings.

d. 50s

During your 50s, you must prepare for the unexpected. Seek the financial experts’ help if you must. Then, plan your exit with glee because you are well prepared for it.

Note: This is just an ideal time frame for your Retirement Savings. Contemplate and reconsider the realistic measures that are suited for you.

The Secret Habits of Financial Savvy People You Must Adopt

Some people struggle to make ends meet while others succeed in their finances. Have you ever wondered why? The answer may be a combination of different factors that play a significant role and one of them is repeated behavior. An individual’s repeated behaviors or habits are learned from young and affects the person’s decisions in the long run.

So, understanding the value of money and being taught at an early age to save your allowance, watch your spending, and note down your expenses can really boost your finances throughout your life. As the saying goes, old habits are hard to break. Without further ado, here are the Secret Habits of Financial Savvy People That You Must Adopt…

1. WATCH YOUR SPENDING

The first step is to be aware of your spending patterns and exactly how much you are spending per month and per annum. This will help you decide how much you shall save and help you to highlight the unnecessary expenses.

Recording all your expenses, no matter how big or small they may be, can help you plan your budget wisely. Find the perfect (and Free) money management app for you here.

Lastly, stop buying useless stuff that you do not need. Rethink if buying overpriced coffee rather than making your own coffee at work saves you more. Instead of buying lunch, pack your own lunch for at least 2 months. It may seem simple, but these unnecessary expenses add up.

2. SET SMART FINANCIAL GOALS

Develop a habit of financial goal setting to know where you are going and to plan how you can get there. Write down your financial goals with a witness (e.g., spouse or a close friend) and contemplate the monetary milestone you would like to accomplish in the next 2 to 5 years. Track down your monthly progress.

This habit is practiced in businesses that have quota system or in fundraising events, but it surely works for personal finances too!

3. ACCOUNTABILITY AND INDULGENCE

In most cases you must you shall practice the habit of being accountable and owning the responsibility in your spending. Be accountable of your spending by managing it and by following your financial goals. It is an important habit if you want to maintain consistency and progress.

Image Credits: TaxCredits.net via Flickr

In order for a habit or a behavior to be repeated, it must be rewarding. Set aside at least 3-5% of your income to a category called “incentive or shopping money”. I personally do this through the envelope budgeting system (learn about it here). Giving yourself a well-deserved treat after the whole month’s work will surely keep you going.

Use Envelope Budgeting To Manage Your Money In Just 3 Simple Steps

According to DEBTSteps.com, envelope budgeting or envelope system is a popular way of maintaining a budget. It starts by storing the cash into separate categories of household expenses that are allocated in separate envelopes.

1. TRACK YOUR LAST MONTH’S SPENDING PATTERNS

One of the first steps that you have to take is to analyze your spending patterns, variable expenses and fixed expenses (i.e., monthly electric bills).

Fixed expenses remain the same every month (e.g. Hand Phone Plan, or HDB Rent). Variable expenses include food, entertainment, clothing, and other expenses that may change every month or year. The challenge now is for you to choose on which expenses you can reduce.

2. DEVISE A BUDGET PLAN

Recording all your expenses, no matter how big or small they may be, can help you plan your budget wisely. Categorize your expenses 7 or more sections such as Rent, Utilities, Electricity, Groceries, Gas, Entertainment, Savings, Loan, Childcare, Tax, Travel, etc.

For example if you are Fresh graduate living in your parents’ house and you earn S$1600 a month. Allocate your money with the fixed expenses first.
Rent- S$700

Utilities- S$150

Electricity- S$80

Student loan- S$100

Fixed Expenses Total: S$ 1,080

Then your variable expenses…

Savings- S$170 (transfer it to your bank account)

Groceries- S$100

Travel- S$100

Entertainment-S$100

Emergency- S$50

Variable Expenses Total: S$520

3. PUT YOUR INCOME IN SEPARATE ENVELOPES

Image Credits: wikihow.com/Do-Envelope-Budgeting

Use your marker to assign each category to each envelope. Use whatever size is best for you. It shall be able to fit easily in your purse or wallet. Follow the budget plan and allocate your money accurately. Spend only from the designated envelope and stop spending once you’ve emptied it. This practice of discipline will help you save a great deal of money.

Watch this simple video tutorial of the envelope budgeting or envelope system by NCNBlog:

How A Couple Paid S$36K Worth of Debt In Just 6 Months

A couple from America has consciously decided to look into their expenses and pay off their US$27, 000 (S$36, 474) worth of debt in just 6 months.

Jackie or better known in social media as The Paleo Mama and her husband sat down to discuss their finances since they were supposed to buy a house. If they are going to pursue in buying the house, they will get themselves wrapped up even more in debt.

They found out that they had US$50, 000 (S$67, 546) worth of debt due to accumulated education/student loan and the worth of their new car. They did not realize that they were supposed to pay student loan quickly as its interest and value pile up in time. So, they were determined to turn things around.

Here are the 6 things they did to cut down their expenses and earn more income:

1. MONEY MANAGEMENT

First, it is important to track where your money is going through the last month’s bank statements and receipts. The couple noticed that they are spending too much on groceries and eating out.

Image Credits: Jason Rogers via Flickr

With these things in mind, they devised a plan to categorize each expense and allocate specific amount of money on to it.

2. CUT DOWN MOBILE PHONE PLANS

They switched to prepaid phones and got rid of their iPhones. This brought them from US$160 cost of mobile phone plan to US$60 cost of prepaid phone per month.

3. CUT DOWN THE CABLE TV AND ELECTRICITY

They started using Netfilx and Hulu to stream shows (the first month is Free) rather than subscribing to cable TV. Also, they managed their electricity by turning off the lights and controlling the temperature of the air conditioner.

4. SELLING AND USING ESSENTIAL OILS

In order to earn more money on the side, Jackie learned how to make essential oils and sell them online. They also stopped buying over-the-counter medication and cleaning products and started using essential oils instead.

5. SELL THEIR STUFF

They sold their old car (now they have one family car), furniture, clothes, toys, and so on. Furthermore, they only buy used clothes on Goodwill or the local thrift stores. This helped them earn a lot of money.

6. BE HONEST ABOUT THE SITUATION

They called various companies to tell them that they can’t afford the various plans anymore. The customer services helped them to reduce the payments by more than 75%.

As you can see, Jackie and her husband were able to pay off over half of their debt by budgeting wisely and selling their stuff. Fortunately, you can also use these strategies yourself!

5 Ways to Teach Kids About Saving Money

Money gives people, of all ages, the decision-making opportunities they need. Educating your kids to make wise money decisions earlier on will affect their finances in the long run.

The most important thing you must do is to make saving money as fun as can be. Here are 5 Ways to Teach Kids About Saving Money…

1. MONEY INTRODUCTION

Once your children can count and discriminate, introduce them to the different denominations of money. Take a conscious effort in providing them information about money and savings and be ready in answering their countless questions.

Watch this cool way to introduce money and its values:

2. SET UP BUYING GOALS

Setting up realistic goals is the foundation to learning about the value of money and saving. Ask your children what they want to buy with their money. For instance, the toys, video games, and stationery items are the things they shall save money for. These goals will help the children learn to become more responsible.

3. USE A PIGGY BANK OR A MONEY JAR

After identifying the short-term goal, provide your child with a small piggy bank or a money jar where they can fill up their savings with. Have your child draw the picture of the specific toy on the side of the piggy bank or the money jar. Through this, they will be motivated to get what they want.

You may also want to help your child understand that some items will take longer than others to save for. For these long-term goals (e.g., going to Universal Studios), provide them with a bigger money jar.

4. ENCOURAGE SAVING

Be the good example to your children by putting some of your coins into their money jar. Since most young children want to be like their parents, seeing you do it will provide them with inspiration to save.

Aside from this, you may give them money in denominations that encourage saving. For example, give your children a $6 allowance that consists of three 2 dollar bills. Tell them to set aside $2 for their money jar.

5. PLAY GAMES INVOLVING MONEY

Image Credits: Rich Brooks via Flickr

As I said, the most important thing you must do is to make saving money as enjoyable as can be. Play games that teach children about financial concepts. Such games include Monopoly and The Game of Life. They will not only have fun but it will also shape their money management skills.

Sources: Money Crashers and Family Education

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