According to some financial advisors, low interest rates and government intervention are forcing more people to put-off retirement to build a bigger nest egg.
It is easy to see why. Just 10 years ago, a healthy $500,000 in superannuation term deposits would have returned a retiree more than $31,000 per year. Fast forward to now and that same super balance would land them just $11,750.
It seems would-be retirees are increasingly caught between a rock and a hard place.
Fortunately, for those that have time to prepare for retirement (as little as five years or more) or want to retire early, the time for action is now. And following some very simple rules will give you a greater chance of retiring on-time or early — with as much as you need.
1. Invest in yourself
This one is overlooked until it is too late. There is a saying that an investment in yourself pays the best dividends. Being lazy or making silly decisions because you didn't understand something is a great way to lose money. You don't have to get a PhD in finance; there are loads of cheap courses, websites and tutorials to help you understand your finances. As a basic example, you could choose to read one page of a finance blog each working day. You'll soon find yourself understanding multiples of what you do today.
2. Live within your means
This is the most boring advice you will ever hear. Track your budget for a week or month using a free phone app or go back over your day-to-day bank statement. Total the unnecessary spendings, the purchases you don't 'need'. Then, sit down and set a budget 10% below that figure. Do it again next month.
Another tip is for whenever you get a pay rise. Try not to buy a new car or go on a holiday, save that money while you spend the same amount as you did on your old pay packet.
3. Know your super inside and out
Superannuation is something all of us should have. Unfortunately, many women and older Australians have not had the same opportunities afforded to others who have been on this planet 40 years or less. Even still, you should know where your super is invested. Use the ATO website to track down lost super, put it all in one account, call your super company, ask them how much fees you are paying, and if you are automatically buying insurances through them and how much they cost. You may be doubling up on the same insurance.
If you want to take control of your super, you can do so by opening a self-managed superannuation fund (SMSF) — here are some free tips. If you don't understand it completely or don't have the time, that's no excuse, because you can…
4. Seek help
See a licensed and trustworthy financial advisor, accountant and estate planner. They should charge by the hour — no commissions! 41% of people don't think they have enough money to justify seeing a planner but, chances are, you can't afford not to.
5. Start now
Don't put it off. Don't wait for the New Year to roll around to make a resolution. Start now. It's easier than putting it off. You can start by saving $1 in a drawer or putting all your loose change in a piggy bank until you have $500 to invest in shares. Another cool idea is the $5 challenge: Anytime you find yourself holding a $5 note, refuse to spend it and save it instead. Wait till the piggy bank is full, break 'er open and wallah! Go buy some shares or open a term deposit.
Foolish Takeaway
It is free to be your own financial advisor and start preparing for an earlier — or more fulfilling — retirement. These are some simple tips to get you started on your journey.
