Understanding simple steps to save for your retirement: What you earn, i.e. your income is centered, mostly, when it comes to “how much you actually need when you get retired”. But, are you really sure that the math used here is all correct? I am not. Suppose if you draw a hefty sum from where you work (monthly) but barely manage to save a dime out of it; would you retire rich? I guess not.
On the other hand, if you get to save even a 30% (roughly) of whatever that you earn in a month, you’d definitely be at a much better place than the former you, right? So, the math here needs to be shifted to “savings and expenditure” and not on the overall income. You’d be surprised to know that still many are sticking to the former notions of 70% of the income but yes, there are loopholes:
- You wouldn’t want to get through an entirely miserable young age just to retire rich, would you? – That, sometimes, becomes the case when you try to save 70% of your income.
- You are certainly not including the notion of current taxes and increasing health expenses as and when you grow up.
Strategically, therefore, the 70% rule is a decorated bubble. The question is how much do you actually need in order to retire rich? Let’s answer this question carefully in this article.
Here are 3 Simple Steps to Save for Your Retirement
1. When Should You Start Saving?
The best answer to this question would be: “as soon as possible”. You are 21, well and good! 31? It is still not too late to start. You can always jump start your emergency funds whenever you want to. However, being consistent is the only key.
The best part about starting early is the “power of compound interest” even on low proportions of monthly savings. You can save as less as 5000 INR a month and see a huge difference years later.
However, if you are in your 30s or 40s, don’t worry; cutting back on a couple of things would work well for you to get you a feasible retirement fund. As we mentioned, the power of compound interest on your savings, you need to take your picks on where you should invest your money.
Fixed Deposits, Mutual Funds, or SIP? Different people have different priorities based on their own risk-taking capabilities. Choose your own option!
2. Ask for a Raise
If you are confused what does it have to do with your retirement savings fund, wait up? We have an answer for you: The net sum of income you earn in your first decade of working makes much more impact on your net total of emergency or retirement fund.
Asking for a raise would balance out the money going directly from your bank account to your savings account. In the best scenarios, you could use the raised amount to go into your retirement fund (fully or partially) which would act as an extra cash for you in future.
Research says that about 37% of the employees who get a significant raise annually are those who ask for it. So, the next time, don’t wait up until the annual records of employees are checked but ask for the raise whenever you feel necessary.
When Should You Ask for a Raise?
Honestly, there’s no strict rule for the same. But if you are asking for the possible options then it could be one of those times whenever you have successfully completed a project or have brought a fruitful result for the business you are working for.
3. Does Fixed Deposit Always Work?
According to traditional sayings, you should focus more on keeping your savings in a fixed deposit. These days, it is quite controversial to choose where to put all your stakes on?
The greatest advantage that a fixed deposit offers is that it can be unsealed quite easily in case of an emergency. When you choose any other option to put your money into savings, you don’t actually get this leverage. Moreover, you might have to pay an extra unnecessary sum in order to unseal your deposit in case of emergency. True.
However, the rate of interest provided on a fixed deposit is very, very low. In fact, it is incomparable to other means such as mutual funds. Viewing the other side of the coin, mutual funds investments can be quite risky. They are subject to the market risks and what not.
Also read: Where Should You Invest Your Money?
What is the Best Way to Invest then?
Now, the correct way is to break your proportions into pieces and put them into different means such as fixed deposits, stocks, mutual funds, real estate etc. There is no compulsion or a set of predefined rules to govern the context of retirement savings. The magic lies in the way how you balance your savings and lifestyle.
That’s all for this post “Simple Steps to Save for Your Retirement”. Let us know how would you like to Save for your retirement in the comments below. Happy Investing!
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