Money management is one area where there is zero room for experimentation because the implications can be costly. Even if your income exceeds your expenses, it is important to understand and follow the tried and tested rules of personal finance to enjoy financial freedom during retirement.
So follow these 10 money management tenets and retire stress-free:
Start a Self-directed IRA Now to Retire Tension-free
Boost your savings by investing in the right instrument. A self-directed IRA is the only retirement account that gives you the freedom to leverage lucrative investment options like real estate, precious metals, stocks, bonds, mutual funds and more. A self-directed IRA not only brings you complete checkbook control with instant asset acquisition but also offers great tax advantages.
Grow Your Nest Egg
Your working days will come to an end eventually so start your retirement planning as early as possible and invest as much as you can. If you want a comfortable retirement where you don’t compromise on your lifestyle, save and invest. Start by setting money management goals both short-term and long-term, plan your finances and put them on paper so you stay on the right track.
Build up Your Buffer Zone for Emergencies
When it is the end of the month and you are broke, even a $500 auto repair can be devastating. So, make sure you have an emergency fund in place to handle unforeseen expenses. Keep at least a $1,000 aside to handle such situations and continue to invest towards your retirement reserve.
Automate Your Retirement Savings
Plan ahead to save and invest every month because even those with the largest retirement accounts, are not necessarily the highest earners. So, pay yourself first and just so you don’t forget, automate your savings to an emergency fund, investment account and most importantly retirement account.
Make a Budget and Stick to It
Even a small leak can sink a big ship, so beware of those small expenses that sneak in every month. That latest smartphone, those weekend trips, or expensive clothing brands are the little leaks in your life that can eventually take the form of unpaid credit card interest. The easiest way to stop these unnecessary expenses is to plan your budget and stick to it.
Spend Less Than Your Income
Despite being a fundamental rule, it is often forgotten. This explains why financial issues are rampant in the society. The key to being financially successful is spending less and staying within your means. Prioritize your needs and accordingly set money aside so you never go overboard with your expenses. From finding lower rent and carrying coffee from home to trimming energy bills and hitting grocery sales, there are several ways to cut down on your daily expenses.
Earn More Than Your Expenses
Look for more than one way to earn money. This can include generating a passive stream of income while you’re sleeping, taking up a part-time job, working on weekends or simply switching your full-time job with a small business. Successful money management calls for a proactive approach where you are not dependent on a 9-5 job or a third party to provide your income. It is a mindset that motivates you to make the right money choices and improve your financial status.
Avoid Getting into the Debt Trap
Debt can happen to anyone and it is fine until it spirals into an insurmountable financial obstacle. Matters get worse when you can’t pay it back and it keeps you from doing things you want to. So, avoid getting caught in this vicious circle and if at all you do, prioritize your repayments over everything and get out of debt as soon as possible.
Make Retirement Planning a Priority
If you want to enjoy a better standard of living and stay financially independent even when you stop working, start planning for your retirement today. A sound retirement plan will ensure you don’t outlive your savings even if you lose your spouse, are faced with a medical emergency, or a chronic illness crops up. Life is getting demanding with every passing day so plan smartly and continue to enjoy a comfortable life till your last breath.
Keep Your Finances Under Control
Becoming financially independent and enjoying the same lifestyle during retirement requires you to be proactive about personal finance and stay prepared for financial contingencies. Go beyond curtailing expenses and saving pennies and purchase health insurance, auto insurance, life insurance and disability cover. This will protect your retirement reserve from running out due to emergencies and keep your assets safe from creditors.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday and NuWireInvestor. If you need help and guidance with traditional or alternative investments, email him at [email protected]