Have you thought of how you are going to fulfill all your basic needs when you retire? If not, then you need to start doing it soon. Remember that you are going to need more money to survive in future than you need now. That’s because keeping inflation in mind, all your current expenses are going to multiply with time. For example, a half litre bottle of mineral water cost Rs. 5 ten years ago and today, the same bottle costs Rs. 10. That’s almost twice the price of what it cost a decade ago.
When you retire, the list of expenses is not going to decrease, in fact it is going to increase. Obviously, some current expenses like your child’s education fees or EMI of your recently purchased car won’t be there, but recurring expenses like utility bills, grocery bills, medicine bills, doctor fees, etc. are bound to remain stagnant. In fact, as you grow older, medical expenses are bound to rise. Hence, if you do not start saving and investing at an early stage in your life things might be a lot tougher in future.
But before you go ahead and invest your hard earned money in any scheme, it is better that you understand your financial goal. Having a clear financial goal is of utmost importance as it helps an individual with effective financial planning. Also, when you have a defined goal you get an idea on how to spread out your investments in order to achieve that goal.
And if building a retirement corpus is your main concern, not only must you start saving and investing in solution oriented schemes like retirement funds, but you need to learn to control your expenses as well.
Here’s how to do so-
- Leave no debt behind
If you have any unpaid loans, unpaid credit card bills or if you owe anyone in person, make sure that you get rid of all such debts. When you retire you will be left with limited income sources and hence, the last thing you want is to be debt ridden during that stage of your life. Hence, if you have any such existing debts, make sure you get rid of them as soon as possible so that it doesn’t affect your savings later.
- Practice living on a fixed budget
When you retire, you will be left with a certain amount that you will receive from Employee Provident Fund and Public Provident Fund (that too if you have invested in one). You might receive pension if you are a government employee or if you invested in a pension scheme. That is probably going to be your only source of income. Hence, it is better that you start practicing on how to live on a fixed budget. This includes getting rid of all the unnecessary expenses that like eating from restaurants, watching films in multiplexes, impulse shopping, etc. The earlier you get used to living on a fixed budget the better it is for you.
- Invest in solution oriented funds
Once you start living on a fixed budget, the money that you save can be utilized to invest in a solution oriented retirement fund. There are several retirement mutual funds carrying different risk profiles. Hence, depending on your risk appetite you can choose a retirement fund that might help you get close to your financial goal.
Remember that sunset years are the years when you need to relax and enjoy life to its fullest. Thus, make sure that you get rid of all the debts so that you can lead a happy retirement life. Learn to manage your expenses and invest wisely. If necessary, seek the help of a professional advisor.