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August 9, 2018

6 Steps to Financial Freedom Come Retirement

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At what age do you want to retire?

I never fail to ask this question to the people I sit with for a personal financial planning. Most of the time, millennials are those who would say, “I don’t know yet” or “I haven’t thought about it” and have a little side smile with a shrug of shoulders.

If you are in your 20s up to early to mid 30s, then you are a part of the millennial generation and I know you would tell me, you are just starting your careers so you haven’t thought about your retirement yet. It’s not exactly a top priority among the young people because the common thinking is that it can be attended to later on.

Most of our parents thought the same that’s why they planned for their retirement fund nearing the end of their working life. Because this was the case, there was very little time for them to be really prepared. The reality is, some continued to work beyond 60 to 65, most depended on their family members and charity. If you keep on ignoring the truths about retirement, then where would you find yourself later?

We are estimated to have a life span of up to 67 yo for males and 73 yo for females. This means, the longer we live, then the longer we will need to spend for living expenses. Most of us would underestimate the cost of retirement, but coupled with a longer life span, say 15 or 20 years more after retirement, means a bigger retirement fund is needed. The average monthly pension provided by government pension or employment benefit plan may not be enough to sustain your retirement expenses.

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These are some important facts about retirement, and reasons why we should take it
more seriously even if we’re still young. It is a scary reality, but we can turn this around for our generation.

Instead of the common thinking of associating retirement with old age, it is better to view retirement as gaining financial independence or freedom. It is simply the ability to do things you want without having to worry about working for money.

Do you want to be financially-free in your retirement years? Here are 6 steps you can act upon now if you want financially-free retirement.

1.Get started now!

Saving for retirement is about building PASSIVE INCOME, or also known as getting “money working for you” (or money-at-work). The 3 factors in building a passive income is time, money, and interest. When it comes to TIME – the sooner you start, the better. The power of time is also a factor in compounding interest as it works best when you start early and save consistently. A small amount of savings regularly may add up to a lot over time.

2.Be financially-educated.

There are many ways to gain the knowledge to make informed decisions about retirement investing such as doing-it-yourself by researching or choosing to consult a financial advisor. Financial education is for everybody. The more you understand, the better able you’ll be to develop a plan that will help you to build the lifestyle in retirement that you desire.

3.Manage your spending.

Understand your money spending habits by tracking your expenses and then make wise spending decisions. The more you control you spending behavior, the more you can save for your retirement. There are big financial decisions you will make such as buying a home or car and it might have impact on your financial goals. It’s better to think about the long-term costs of these decisions first.

4.Prioritize paying yourself.

The idea in retirement savings is that the more money you saved, the further ahead you would be. However, if you had bills to pay, you can’t really just skip an obligation so you can be further ahead in your savings. Paying yourself first actually means putting your money away before you spend it. What’s left in you is what you’ll then use to make ends meet, whether it’s by spending less or making additional money elsewhere. Allocate a certain % of your income such as 5%-20% to your retirement savings and do it regularly. But if you are a high-income earner, contribute even more.

5.Be Patient.

The more that you are on the right track, the more you can save and invest, and the faster you can reach financial freedom. It’s all about patience and optimization.Completely funding your retirement goal may take decades and the fruits of compound interest are experienced in the long-run. Don’t be discouraged. Even if you are only saving a few pesos a month, that’s alright because it all adds up, and in a few years it will mean a lot to have that passive earnings.

6.If needed, seek help.

If you need help in calculating your retirement saving needs, a financial advisor can do that for you. At My Wise Finances, we are actively conducting free non-obligatory personal financial planning to help people build their financial plan and develop a well-defined strategy based on how long to to invest, the goals for the future and the changing needs. If you’re not sure how to get started , you can send us a message to schedule a personal meeting.

Good luck!

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