Your money makeover guide for 2020: Part 2
You deserve to retire with enough money to do what you want to do when you want to do it. But there’s a problem….
- There’s information overload
- You have bad money habits you want to replace
- You’re unsure about seeking advice to help make better decisions
In this part 2 of our 3-part series, we turn our attention to those of you who are less than 10 years away from retirement: the Pre-Retirees.
We’ll take you from knowing why to understanding how to maximise personal wealth, in preparation for your holiday of a lifetime: your retirement.
Pre-retirees: a little bit about you
At this stage in your life, you’re likely in one or a combination of these situations:
- Paid off or almost paid off your mortgage
- No dependants to support
- A capacity to save
- A comfortable standard of living
Pre-retirement blues for Tony and Helen
“How can we make our savings work hard to ensure a comfortable retirement?” For Tony and Helen, 57 and 55, it’s the sixty-four thousand dollar question.
“We’d like to be able to retire by 65, but we’re unsure if we can since we still have a small mortgage of $50,000,” said Helen, who works as a nurse. Tony, shares this sentiment, having worked for the same large manufacturing company for the past 35 years.
They have a comfortable lifestyle, eat out frequently, and have a capacity to save at least $1,000 per month. But they don’t know where the money goes.
It doesn’t help that they’re also very financially dis-organised and routinely misplace bills and statements.
“It’s a case of overwhelm”, added Tony, who feels they’re too busy to think about retirement. He is fearful they won’t have enough to retire comfortably so they put off thinking about it.
Mostly, they’re concerned they haven’t started planning for retirement early enough, and admitted they are unsure about investing, given the current economic uncertainties.
Tony and Helen were also keen to help out their three adult children once they’re retired; if they can.
3 money makeover tips for Tony and Helen
Here are some tips to whip your finances into shape:
- De-clutter your finances
- Go digital and subscribe to online access for statements. If you find yourself routinely misplacing bills and statements, part of the problem is overwhelm.
- Set up automatic direct debits to pay bills for recurring expenses like council rates, insurance premiums, and mortgage payments.
- Buy a shredder for all the unnecessary stuff.
- Review your spending habits
- Avoid impulse purchasing. Refrain from using your credit card and use cash whenever possible.
- Avoid convenience purchases. Re-think if you really need that online shopping, Uber Eats and eBay accounts.
- Start an envelope budgeting system (2020 style). This is based on the whole psychology of people spending less when using cash instead of cards. You will be far more restrained in your spending when you pull money out of your wallet. It will force you to think twice that maybe you don’t need that item, after all. For the technology savvy, there are apps and other online tools that can accomplish the same objectives such as Goodbudget, 1money, Fudget, Wallet, and Monefy.
- Start planning now for a successful retirement
- Design your dream retirement. Start thinking about your retirement goals and how long you have to meet them. How much income do you need to live on? Do you want to go overseas annually? How about that motorhome to tour around Australia?
- Find ways to save to fund it. Once you know how much your desired lifestyle will cost, it’s time to work out how you plan to save for it. On top of that, you also need to know how long your money needs to last.
- Plan for longevity. You don’t want outlive your savings. If you want to retire early, it may mean running out of cash and having to depend on the Age Pension for the rest of your golden years. Make sure you’re ok with that.
- Track your progress. If there’s a gap between your retirement goal amount and your projected savings, now’s the perfect time for you to embark on a savings sprint.
- Review your estate planning. While you can’t rule from the grave, you’ll have peace of mind knowing your dependants will be taken care of.
A money makeover is not a new year’s resolution
It’s not about new goals or promises to start doing something. It’s not about radical and immediate changes in your finances either.
It’s about a change in your behaviour and building healthy financial habits. Because bad money habits cause unnecessary stress in your life.
Financial management doesn’t have to be complicated. With a little time, effort, and perseverance, you can cut the complexity out of your finances and enjoy more free time and a lot less stress.
Breaking bad money habits
The first step to breaking a bad habit is awareness. Just like any habit, you must first identify the habits you want to change, identify the underlying cause, and then do something to fix it.
Habits are a process, not an event. Since bad habits provide some type of benefit in your life, it’s difficult to eliminate them. Instead, replace a bad habit with a new habit that provides a similar benefit.
Final Note
Life doesn’t always go according to plan so it’s tremendously helpful in performing reality checks now and then.
It’s important to get back to basics and think long-term. Planning is key.
Whether you are trying to do it yourself or with the help of a professional financial planner, you’ll need time and commitment to take control of your financial future. This includes a change in behaviour and building healthy financial habits.
Remember, don’t let your emotions or bad habits get in the way of saving money for your future retirement.
If you plan early, you CAN retire with confidence prepare for the future you’ve always wanted.
Now is the time to talk to us. Book a discussion with our experienced team from JBS Financial Strategists here and they can take you through how we can help.