You will just wake up one day and reality will start to sink in that you're about to retire and won't have an income to expect monthly. I remembered this TV commercial before that a company threw a party to the retiree but the retiree seems not to be happy about it, probably because he/she doesn't have enough savings to cover his/her remaining years.
One of the fears a retiree has is that if he/she has enough savings to use until he/she dies and if he/she has enough funds to cover for medical treatment.
This is where financial literacy comes in.
There are a lots of articles available online and offline for us to read on how we can manage our finances efficiently. Aside from that, there are also seminars and workshops that we can attend to know more about financial management and to have a hands-on experience on doing calculations in our finances. It may sound intimidating at first, but once you have learned the basics, you will start to be more conscious about the decisions that you will make in terms of budgeting, investing, and spending.
So the question is: How do I prepare for my retirement?
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PREPARING FOR THE FUTURE
First and foremost, one must have a goal. Goals should be specific, time bound, and realistic. For example, you want to have your own house in ten years' time, so you will make sure that within that period, you will have your own house. You will do all the necessary actions to save money and to hunt for the best deals available so that you can have a house of your own. You must be committed to the plan that you have made so that you will be able to achieve your goal.
Second, save. It is a common practice that we only save what is left after we have deducted all our expenses. The right way of saving is allotting a specific amount monthly which is not being affected by your expenses. You 'force' yourself to save. It may a bit difficult at first, but once you get the habit of saving, you will no longer see yourself 'forcing' to save money for the future.
Third, have an emergency fund. Emergency fund is different from your savings as this is the fund that you will utilize when something unexpected happens (e.g. hospitalization, car repairs, death, etc.). You must also commit that you will only touch your emergency fund when your main income has depleted. It must not be used to purchase a new gadget or a new appliance. Be sure to determine what is emergency in nature and not.
Fourth, get an insurance. I was offered an insurance in my 20s but I was not that committed to pay for it and I am not that knowledgeable about insurances. As a result, it lapsed after four years. I wasn't informed about the consequences of non-payment, and the insurance agent who offered me the insurance didn't guide me very well. It may seem to be a bit late to get an insurance at my present age, but then nothing is too late when you start preparing. The only consequence is that the premiums are higher compared when I was younger.
Fifth, make more money. It means work harder, grow your money by investing or putting up a business. Investment may come in different forms, which I will discuss later. Of course, how can you prepare for retirement if you will only be contented with whatever you are earning right now?
Sixth, seek advice from financial experts. Financial experts are there to answer all questions that you may have in managing your finance. They will analyze your risk profile and will suggest the best investment plan for you. Financial experts are not just to earn money from you, but to really help you grow your money. Choosing the right financial expert to help you will also make you feel secure about your money. Have a discernment to choose one based on their knowledge, work ethics, customer service, availability, and honesty. Choosing the right financial expert to work with you is based on trust, so make sure that you are comfortable to discuss money matters with that individual. It can be just someone you have met at an event, a colleague, or a friend. However, it doesn't always follow suit that the financial expert that you will consult on should be a close friend. Sometimes, too much familiarization makes the business transaction go haywire.
Lastly, stay on your course. Stick to your plan on saving and investing. Don't worry, you're on the right track.
CHOOSING THE RIGHT INVESTMENT FOR YOU
There are lots of information out there available for you to read on how you can save. There are also lots of investment plans available out there too, but bear in mind that the type of investment that you will get into must match your risk profile and the amount that you are willing to invest. Some investment packages require higher amount but it has also higher yields and there are some investment packages that are friendly to the pocket but only offers average to low yields. In addition, when you invest, it also depends on how long you intend to save (long-term or short-term).
Let me discuss the available ways for you to save and invest:
- Savings/Time Deposit/Emergency Fund--these are for your short-term investment plans and for easy withdrawal in times of need.
- Investment--for your long term needs. Put an amount on this type of investment that you will 'forget' for a long time and just check from time to time if it grows or not. The money you saved in investment is intended for your future needs like travel and retirement. There are different types of investment (money market, stocks, bonds, mutual funds, etc.) and the rates fluctuate every now and then so choose the right kind of investment based on your risk profile (high, moderate, low). Ask a financial expert to determine your risk profile.
- Insurance--this will serve as a legacy to our loved ones. While some may feel uneasy talking about death, but we will all go there. This will serve as a seed money for our loved ones in starting all over again. There are other kinds of insurances which caters to your other needs (e.g. medical, travel, car, etc.).
- VUL (Variable Universal Life)--or in other words, an insurance with investment component. It gives you the best of both worlds, balances your financial goals and needs. The insured reaps the living benefits (gains) and the beneficiaries and death benefits.
We can easily reap the fruits of our savings and investment during our lifetime so we must be wise enough where to put our money. Just like the saying goes, "Don't put all your eggs in one basket."
WHERE TO PUT YOUR MONEY
Now that we have determined the different types of savings and investment, the next question that you have in mind is: Where do I put my money?
We have heard of a lot of investment scams on the news and people nowadays are now more careful on where they will put their hard-earned money. There are a lot of factors to consider in choosing the right financial institution for you and will help you grow your money.
Generally speaking, almost all financial institutions offer the same products and services, they just have different terminologies for each kind. One thing that we have to check is if it is regulated by the right government agency (Insurance Commission for VUL and other insurance products, SEC for investments, and BSP for banks).
Apart from that, one must also look for the following criteria:
1. Longevity of the company (how long the company has been running in the business)
2. Track record of the company (the positioning of the company in the industry)
3. Accessibility/Reliability (if it is easy to do transactions with the company during pre-sale and after-sale)
4. Trustworthiness (how confident are you in the company that the company will take care of your money)
5. Quality Service (timeliness of the delivery of requests, regular updates, and technological advancement of the company)
You can put your money either in the bank (the most basic financial institution for saving money), investment company or insurance company.
THE BEST TIME TO SAVE
Any time is the best time to save! There's no such thing as wasted time when you start investing. As long as you have enough money and you're strongly confident in your current financial state, then start growing your money. We don't know what the future holds for us, so we must be prepared for those uncertainties.
Of course, we must always pray to God for wisdom. Our money is His money so we must consult Him on how He wants to grow what He entrusted to us. We must not also be foolish in investing. A lot promises that your money will grow in a short period of time; we must take it as a red flag if our money will grow at an immense rate. The growth of our money should always be aligned with the current market rate.
I won't be recommending companies or financial institutions where you can put your money in my blog. I blogged about this to give you an overview on how you can save for your future, but should you want to discuss your future financial plans, I can recommend a financial planner for you, just send me a message thru my Facebook page or via email.
May God always grant you the wisdom and discernment in all of the decisions that you will make, particularly in finances.