Life expectancy around the world has witnessed a dramatic increase in recent times and the credit for this, undoubtedly, goes to improved health care. However, everything has its pros and cons, and so does the rising lifespan. A longer life clearly implies that more money is needed for housing, food, taxes, health care, and other living expenses.
This is where smart financial planning comes into the picture.
According to the 25th annual Retirement Confidence Survey published by the Employee Benefit Research Institute (EBRI), 15% workers are not at all confident about being able to afford basic living expenses after retirement.
You don’t want to be among them, which is why, having a substantial amount of money socked away is crucial for living a comfortable and hassle-free retired life. Moreover, if you fail to take proper care of the financial planning process, chances are your management of finances will fall apart in case of an unexpected death, illness, or a stock market crash.
Achieving financial security isn’t just about accumulating wealth, but also being prepared for the unforeseen. It is, therefore, vital for you to take a meticulous and balanced approach to achieve financial security.
Financial planning can be daunting, considering the sheer number of important aspects that need to be taken care of.
Here are a few tips that can aid you in gaining more control of your financial security.
1. Start Saving as Soon as Possible
If you’re already close to your retirement years and think that it is too late to initiate saving strategies, you may want to reconsider that.
It’s never too late to start saving as every penny saved will go a long way in covering expenses during your retirement years. For inculcating a habit of saving regularly, it is imperative that you develop a detailed list of your current assets, liabilities, and income.
Try to save as much as possible in your tax-deferred retirement account as that will prevent you from spending that amount on impulse. Kickstart your savings plan by opting for your employer’s retirement plan.
Remember the rule of thumb – your financial security is riding on how much you can save today so that you can have substantial financial resources to draw from later on.
2. Stick to an Effective Budget
If you can’t get a grip on your everyday spending, then budgeting is not just important but vital for you. It can be arduous, but it can help balance your current and future financial needs. Make sure that your budget reflects your values and priorities.
Creating and sticking to a budget will help you develop wise spending habits. This, in turn, will aid in managing your finances in a better way.
3. Keep Potential Expenses in Mind
When planning for retirement, several people tend to forget to factor in the unexpected long-term expenses that may come along such as medical and dental costs, income tax, and long-term care. Failure to take care of these costs can prove detrimental for you.
It is, therefore, important that you carefully ponder over and list down all potential expenses you may incur during your retirement years. This will help you be prepared, make realistic financial projections, and plan accordingly.
Consider using tools such as Mint, Yodlee MoneyCenter, and Personal Capital to keep a track of every nickel and dime that you spend.
4. Take Calculated Investment Risks
One of the most important aspects related to investment is to expose your money to just enough risk to accomplish your financial goals. Nothing more, nothing less.
The world of investment can be cold and challenging. You don’t want to fall short of meeting your financial goals or run out of money after retirement, which is why, it is important to make smart and informed investment decisions earlier on.
When investing, consider using the Systematic Investment Plan (SIP) route. This way, you’ll be able to avail benefits from both, an up as well as a down market.
Further, for successful investments you need to understand its various aspects beforehand. Regardless of what you choose to invest in, you should be clear about how and which sector you want to invest in. For instance, if you’re planning to exchange cash for gold, make sure that you are familiar with the current market prices of the yellow metal and the currency trends.
5. Proper Asset Allocation Is Essential
Are you familiar with the old adage – don’t put all your eggs in one basket?
This holds true for your retirement assets. In order to manage them effectively, avoid putting all your savings in one form of investment as that may result in a complete financial loss if a market crash negatively affects that investment. Moreover, doing so may also limit your return on the investment.
Asset allocation is one of the most vital facets of financial planning. With time, your expenses and risk tolerance may change considerably. Strategic asset allocation will allow for necessary adjustments and help meet your evolving needs perfectly.
6. Choose an Experienced Financial Planner
If you think financial planning and portfolio management would be too complex for you to understand, consider working with a professional, experienced and reputed financial planner.
You should be specific about your financial goals and share your vision with your financial advisor. He/she will help you develop an effective plan in order to achieve your goals within a certain period of time. He/she will also provide you with information about the insurance policies that can protect you and your loved ones from events that can jeopardize your financial security.
Having a financial advisor by your side can be a boon. He/she can help you navigate the seemingly complicated financial landscape and stay on top of things.
Conclusion
Saving for the future can be downright difficult. Some of the best-laid retirement plans can go down the drain if not executed properly or in a timely manner. The earlier you get a grip over your finances, the bigger your savings will be. Careful planning can help mitigate potential post-retirement financial risks. Practicing the aforementioned tips will put you in a better position to take control of your financial security. By planning for unanticipated circumstances and contingencies well in time, you will be able to live a financially comfortable retired life.
Author: Nicola Reynor
Nicola Reynor is a passionate blogger who loves to blog about fashion, beauty, travel, health, fitness, wedding and lifestyle trends. When in leisure time, she prefers to spend time in traveling with friends and family. Connect with her on Google+ and Twitter.
