Saving for retirement and longing to avoid making horrible savings mistakes? This article would show you horrible savings mistakes that can hurt your retirement. Here we go!
Retirement, a keyword that reminds everyone that you can’t be young and vibrant forever. Certainly, we will all get to that old age and there’s nothing we can do about it. Believing in the idea that one will never get old is just living in self-denial. So it is quite mandatory to start making strategic plans for the future and the best way to that is to save up and invest for the future, because whether you like it or not it will come.
This article is solely focused on the horrible mistakes people make in saving that can ruin their retirement plan. Most people have a knowledgeable idea and understanding that retirement will come to pass, so they begin to save and invest for retirement in the future. The sole purpose of saving for retirement is to avoid working or relying on anyone for money when you are old because you will either be ignored or you won’t even be strong again to gain employment. But sadly, only a few people get to live that relaxing and enjoyable retired life because the majority of the people involved in the retirement savings have tampered with the savings plan, and they are left with a small amount of money from the savings. So without much storytelling, let us look at the various mistakes that the majority of people make when saving for retirement.
Poor Savings At A Young Age
The first mistake on our list can be associated with the working-class youths of today. Many of them have forgotten the relevance of saving and investing for the future. You can say that they are more buried in the idea of showing off high social class, living a good life, wear expensive clothes, shoes, bags, and accessories, or even buying expensive cars. Although this is not all that bad because it comes with its benefits but it should not come at the expense of your savings or investment.
Honestly speaking, good times don’t last long if you don’t plan for them. So, this alone is a good reason to plan and manage your finance in the best possible way. First, you can start by opening your pension plan with a valuable and well-respected pension company, then start saving for retirement, which by the way will be an added advantage for you because you started at a young age and in the sense that you will have enough time to accumulate as much money as possible. Let’s take, for instance, You start a savings retirement plan with the sum of $150 monthly at the age of 25. By the time you get to the retirement age of 65 years, you should have accumulated the sum of $72,000 and this is not all.
The best part of a pension plan or a saving retirement plan with a good pension company is the idea of compound interest. This simply means you are being paid a certain percentage for saving your money over a given time, and what is the best factor for compound interest, aside from time. In other words, if you are being paid 7% of your savings annually, you should be getting a sum of $5040 excluding your savings of $72,000. You don’t have to rely on only your pension savings to plan for your future. You can also look for ways how to invest in the long term and one of the best ways to do that is to invest in the stock market by buying shares of a company. Since it has been proven that stock is one of the best ways to save money for the long term. To get involved in the stock market, it is best advised to consult Experts in that field rather than rely only on your knowledge.
Absence Of A Financial Plan
This is another mistake many people can be found guilty of. It is quite easy to say that many people don’t have a financial plan. But first, it is mandatory to know what a financial plan is. According to Investopedia, A financial plan is a document containing a person’s current money situation and long-term monetary goals, as well as strategies to achieve those goals. A financial plan may be created independently or with the help of a certified financial planner. Although a financial plan can not be said to have a strict way or specific method because for people it differs, they are certain principles or guidelines that have to be in mind before a good financial plan can be achieved, namely:
Having A Given Goal In Mind
It is quite relevant to have a given purpose for your savings or investments, that is what do you want to do with the money you are trying so hard to gain. In this aspect, your retirement plan comes to mind. The way you want to live when you are old will determine how hard you try to save up for it.
Do Your Checks And Balances
What I simply mean by doing your CHECKS and BALANCES is try to keep a good track record on where and how your money is being spent. Try to know how much you spend on food, cloth, rent, transport, and other necessities. By doing this, one can detect where he or she is spending his or her money and if there is overspending in a particular area, drastic measures can be taken. When this is done, you can know how much you can save and invest. For example, Mr. Kingsley earns $5000 in a month, and he wants to save and invest for his retirement. All he was to do is create a check and balance list, like this:
Cable fee. $150
Utility bill. $200
Total expenses: $1970
After doing this, Mr. Kingsley will realize that he still has $3030 left, in which he can invest and save. More so, it is quite important to have a financial plan because people that don’t have one may fall victim to the following:
Low budget for projects
No capital for business startups
Fall victim to get rich Ponzi schemes
No cash for emergencies
Low financial power to promote efficiency.
It is not just about making room for investing but it also entails investing wisely. Making an unwise investment is not only a huge mistake but it can also be depressing for one’s health. Imagining investing in a Ponzi scheme that swallows all your money and left you with nothing. This alone can destroy an individual’s mental health and stability. Therefore, there is a valuable need to understand what it means to make unwise investments.
Making unwise investment simply has to do with making wrong decisions because of hasty action. The idea of making an unwise investment just boils down to making decisions with your money without first carrying out a good survey and research about what you are investing in. Besides, when it comes to investing, the adage: “you have to learn before you earn” becomes very vital. It just simply means try to learn about what you want to invest your money on. If you want to invest your money in securities like stocks, bonds, and others, try your best to gain knowledge about it from people more experienced in the field and consult their opinions before making a decision. Making an unwise decision when investing money can be caused by the following:
Making hasty decisions or out of desperation
Incurring debts to invest
Making gambling choices rather than doing your analysis and research
Refusal to consult other people’s opinion.
Rising In Debt
This is a major mistake people make when saving for retirement. Rising debt simply means increasing your debt just because you believe that you have a savings plan that can cover up for it. People who get involved in this have the mindset that they can get things even when the money isn’t available at the moment. Okay, since I have a savings plan I can settle my debt at anything. But the truth is that you will end up in a financial crisis.
When you accumulate too many debts, you end up paying for them all and in the end, you have nothing left and the idea of a perfect retirement is ruined. Like the popular quote by Benjamin Franklin, which says “Rather go to bed supperless, than the rise in debt.” This quote alone tells you that not having food to eat is far better than having debts to pay. A fact about debt is that it hinders a person’s financial growth and development. Money which could be used for better things is being used in settling debts. This could be a painful lesson people have to learn through experience.
Quitting Your Job
Quitting your job is a major mistake people make when saving for retirement. This is because how can you save when there is no source of income. People tend to look for easier ways out when faced with a challenge at work, rather than face it head-on. The working situation in your place of work will get tough when things start to get challenging. It will require you to man up and face the working challenges rather than quitting.
Everybody knows that winners don’t quit, so why should you quit. It is always best to remain at your place of work especially when you are getting good payment, health packages, pension plans, and other working benefits. This is because these offers might not be given in other places. Besides, it is not nice to leave these good working packages for something less.
Moreover, it is quite understandable that there are certain times when quitting your job is the best. Especially when you are not being valued or appreciated for your work, it can kill your zeal to continue working. Though, it is okay to leave, if you get a better offer or a better job, or you leave to start-up your own business. These reasons are quite understandable. But, it all boils than to the fact that if you are quitting your job, make sure it’s for a better job or something better. Don’t just quit because it gets harder for you to perform your duty. Quitting your job can affect your saving for retirement plans because you may get lesser income, poor retirement plans, and package. You might even be forced to use what you have saved up for retirement just for your upkeep, thereby ruining your retirement savings.