Be Prepared and Retire Happy

 

Working can be a joy if you like what you are doing. It is unlikely that you would want to go for an early retirement. However, it can be a pain in the neck if you have to drag yourself to work every morning. Perhaps you may want to retire earlier than the recommended retirement age. However, the choice is yours. As long as you are healthy and love what you do, you should keep working. It is great to be able to choose to do what you like to do for a living. However, not many are blessed with the choice and most people don’t really know what they want. Majority of us hold on to jobs that pay the bills even though we may not like it very much.

Every one of us will come to a point where we would like to take a long break from work. For the fortunate few, there are sabbatical leaves. Most of us don’t have that privilege.  As such, we need to make plan to go for a long vacation. To do that, you need money and time. Nothing beats having a weekly outing with family and friends. In Singapore, most families would go to the parks or shopping malls on the weekends. We love shopping and eating. Many have made these their favorite past-time. Thanks to budget airlines and travelling has become more affordable. Hence many families prefer to travel overseas for vacation, especially Southeast Asia countries.

It is great for family bonding, provided you have the spare cash to indulge in overseas vocation. Unfortunately, a certain percentage of people incur large sum of credit card loan and take expensive overseas vacation yearly. Since many of them pay by installments with their credit cards, they don’t find it expensive to travel. This is one of the reasons why many don’t save enough for their retirement. How to prepare for a comfortable retirement?

  1. Pay your debts and stop incurring new debts. Most working adults have some form of debts; study loan, car loan or housing loan. By the time you choose to retire, your should have no more housing loan or any other kind of debts. The worst kind of debts is outstanding credit card balances that snowball every month. Paying off all debts should be your top priority. Nevertheless, you still have to put aside some money to save while paying your debts.
  2. Set aside a fix sum of money to save monthly. Regardless of its amount, save whatever you can. For a start, try saving 10% of your monthly net income. You have to increase your saving to at least 30% of your monthly salary consistently. However, if you are already in your forties, than you might have to save more than 30% to make up for the lost time of not saving. If possible, stay with your parents until you can afford to buy an apartment or house of your own. You could save a huge sum of money on rental and pay for down payment on your dream house.
  3. Buy a property, instead of renting. Rental fluctuates and the amount you paid is an expense. If you were to own an apartment or a house, there is tendency for the price of property to increase in value in the long-term. You have the option to sell the property or rent out a spare room to generate income. You may sell the property and move to a smaller apartment or house when your children move out. With proceed from the sale of property; you could live comfortably after retirement. Moreover, investing in property is a good way of hedging against inflation. Due to inflation, market forces and government’s development plans, prices of property tend to move upward in the long-term. As such, it makes sense to invest in a second property if you have the spare cash. For example, a two-bedded private apartment here costs around SGD 600,000 ten years ago is now worth about SGD 1 million, depending on location. There is capital appreciation and rental yield increase potential.
  1. Invest only with your spare cash. All investments carry a certain amount of risk. Buying unit trusts, blue chip stocks and ETFs (exchange traded funds) are generally safe if you keep them for a period of time. Even then; you could still make losses; if you sell below your cost. I am not encouraging you to time the market and become a trader; unless you are already a professional one. For the novice, you need to learn how to read financial statements and analysis stocks and ETFs before you start buying. If you find them too tedious and are not diligent in watching your investment, it is best to leave your money in the bank and earn a little interest. It is not worth taking the risk of losing your capital if you are not keen to check and monitor the performance of your investment periodically. We are not talking about checking your stock every day, and get paranoid when the stock prices drop a few cents.             Be careful of investing in overseas projects that promise high returns. The risk is extremely high and the chances of you recovering your money are very slim; especially when your contract is only binding in the foreign country. Besides, the legal fee is extremely expensive for overseas court proceeding. Think thrice before investing overseas.
  1. Manage your cash outflow. Spend when necessary and cut down on non-essential purchases. The more stuff you buy, you need more space to store; and you have more maintenance work to do. If possible, borrow instead of buy. Instead of buying brand new, how about buy from a Thrift shop or second-hand store. Instead of buying popular branded goods, buy the average household brand. Take care of your home appliances and they can last a long time; and help you save money on replacement.

 

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