Define What Retirement is to You
Some wish to never work again whereas others define retirement as not living from paycheck to paycheck. Others would like to leave secular work so they can pursue a hobby or creative line of work which allows them to set their own schedule.
Establish Your Goal
Once you have decided what your ideal retirement is it is now time to calculate how much money you would need to achieve it. In the book Financial Freedom: A Proven Path to All the Money You Will Ever Need, it is recommended to have 25 to 30 times your annual expenses and also a years’ worth of expenses available in cash.
Cost of Living
To be able to reach your goal figure, you must ensure you do not spend more than you earn. When you are working towards your goal, it is vital to live well below your means focusing on your investments. Those who are successful in doing this, say that even small cuts to the expenditure on transportations and food can go a long way in the long run.
Eliminating consumer debt is essential whether it’s a car on finance or your mortgage, its best to enter retirement with as little outgoings as possible. Many also enjoy the peace of mind that no debt brings.
For those that live in countries that require insurance, once your employment ends, most likely so will your health cover. For those that have the option, it is possible to join a working spouse’s health plan. For those that do not have this option, factoring in the cost of insurance is required with research into potential subsidies proving beneficial.
Keep Your Expenses in Check
After working out how much you will spend in retirement the next challenge you will face is sticking to the set budget. The majority of people find they have more time and therefore wish to keep occupied with various activities. For some these activities can become expensive ranging from reoccurring payments from memberships or from the purchase of gadgets to luxury holidays. Retirement should be a time for enjoyment however it is essential to keep your expenses in check so that you do not live beyond your means and ultimately have to go back to work if the money runs out.
Even if you plan every detail, not everything will be in your control. Due to this, it can be beneficial to plan what you can do if things go wrong. If you have more than one property, would you consider putting it up for rent or do you have assets of value that you could sell? These may not be nice thoughts but it is beneficial to plan for worse case scenarios.
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