Planning your finances for a richer retirement

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If you choose the employment track for your life, on average you will spend about 45 years of your life working as an employee. Later on you will retire and spend about 30 more years in retirement. During your employment days it is easier to get your bills settled since your regular monthly salary can be managed well to cover the bills with some back up from your credit loan. However, after retirement when your body gets weaker and you cannot engage in the many economic activities you used to enjoy in your youthful days, hence getting extra sources of income to pay all your changing expenses becomes a daunting task. To avoid being trapped in a situation whereby you are fully dependent on others to support you in your sun set days, all you need is to start planning your finances and follow the following decade by decade schedule.

1. In Your 20s

At this very youthful and energetic age, there are a lot of distractions and peer pressure directing you to spending all your money in short-lived luxuries. However, for a financially secure retirement, you will need to prioritize paying off your debt and saving as much money as you can. Living frugal is the right phrase to describe what you should be doing in your 20s. Student loans and credit card loans should be at the top of your monthly expenses that you settle immediately your salary hits your bank account. You should also have a standing order to your savings account so that you start building your retirement fund early enough. Remember the earlier you start saving for retirement, the more money you will save in the long run and the more your savings will grow due to the compounding effect over the longer saving period.

2. In Your 30s

At this stage in your life you might be considering getting married or you are already married by now. Your expenses are a little bit higher and additional debt may have joined your personal financial books in the name of mortgage for your family house. This is the time you reassess your debt again and prioritize debt that is a must. In addition, you should now join the pension scheme offered by your employer in order to start saving for your retirement in a dedicated manner; in order to supplement your monthly savings. With savings you have been making in your 20s you can now start venturing into long-term investments with high risk but high return potential. These include fundamental investment in equities and trading on derivatives

3. In your 40s

You are now probably at the peak of your career with an all-time high monthly income. On the other hand, you are probably having children who have increased your household budget significantly due to their domestic and educational needs. However, in most cases your income should be high enough to cover these costs if you had started saving and investing in your 20s. Your financial focus at this stage in your life should be to direct more income into savings and investments. You still have the adrenaline to withstand random market fluctuations and so you should take a bet in high return, high risk ventures such as equities and derivatives. You should however ensure that your savings account continues to grow, as well as contribute more to your pension scheme.

4. In Your 50s

In this stage of your life, your retirement age is now in clear view ahead of you in just about a decade. You need to start de-risking you investments to reallocating your investment portfolio from equities to more secure fixed income accounts and government bills and bonds. These will give you guaranteed returns but the rate of return will be lower compared to equities and derivatives. You can as well diversify your income sources into mutual funds and unit trusts in order to increase your returns even as you seek security away from risky financial instruments.

5. In Your 60s

This is the time to ensure all your debts are cleared and all your investments are in safe financial instruments that give you a regular income that can be able to sustain your lifestyle throughout your retirement age. You can decide to apportion part of your savings into real estate investment so that you start earning monthly rental income. You will however need to engage the services of a property manager in order to avoid the work of maintenance and following up with the tenants.

If well executed, the above 5 steps will help you get peace of mind as you look forward to your retirement; as well as ensure that your retirement will be a happy one with access to all the good things you look forward to in your sun set days.