In most of my posts, I have been discussing about the financial goals, short- term and long- term, which an individual must set for himself/ herself.I have also been mentioning that our savings should be invested in such a way and for such a duration that we are able to meet our targeted goals in time and that too with comfort. Although everyone is aware of this, but most people don’t take it seriously and go on postponing setting goals, on one pretext or another. Reasons may be very many because everyone is different; you can have goals that are unique to your own situation. Further, accomplishing goals almost always requires saving money, whereas, most Americans spend all the amount, whatever they earn. They have almost nothing in savings even at an advanced age. But procrastinating the issue is not a solution. As one of the Chinese proverbs says “ Do not wait until you are thirsty to dig a well “. So don’t wait to save money until you are ready to accomplish a personal or financial goal.
Prioritizing Your Savings Goals : –
Now as you are already in your fifties, and retirement is just a decade away, your maturity is much better. So, instead of dreading it, update your financial life by hitting the targets and embrace the coming decade. Many people may have financial goals, although they may not be having a proper plan to achieve those goals. Most common financial goals are : –
- Owning Your Home : – Most Americans dream of owning their own home as renting and dealing with landlords can be a financial and emotional drag.
- Making Major Purchases : – Such as a car, living room furniture, vacations and so on.
- Retiring ; – is a catch all term for full- time work and you have to plan for your comfortable and peaceful retired life.
- Educating The Kids : – The college education is quite expensive and requires a detailed financial planning, much in advance, as you may want to help your children get a college education.
- Owning Your Own Business : – Many employees want to take on the challenges and rewards that come with being the boss, but they are unable to do so as they lack the money to leave their primary job.
Unless, you earn really big or have a large family inheritance, your personal and financial desires will remain a dream. So, you must prioritize your goals.
How To Approach Your Goals : –
Because you’re constrained by your financial resources (most common problem with salaried people) ,especially when you are in your fifties and your children are grown up, you need to prioritize your goals. The following strategy may be helpful in prioritizing the competing goals : –
1 Debt Tamed : – As impressed in earlier posts, take a debt/ loan which you can repay in ten years or before retirement, whichever is earlier. Pay credit card balances before interest is applied.
- 2 Spending : Under Control : – In your fifties you may be in the peak years of your earning period. You can have fun with your money, but don’t short change retirement goals. Double down on savings, as retirement may last a long, long time.
3 Retirement Goals : Defined : – Set a concrete goal for your retirement. Some people save too much and they don’t enjoy life as they become addicted to their saving habits. The other extreme is spendthrifts who live only for today. Both the habits are not good . You have to perform a balancing act. It is said that a est egg of $1 million will last 21 years if you withdraw $50,000 a year (assuming inflation is 2.5 percent and investments earn 3 percent after tax and inflation).
4 Retirement Contributions ; – You must value your retirement accounts. Where possible, try to save and invest in accounts that offer you a tax advantage like 401(K), 403(b), IRA and so on. These have the following advantages :
– Contributions are usually tax- deductible.
- In some company retirement accounts, companies match a portion of your own contributions.
- Returns on your investment compounds over time without taxation
(Refer my post on contributions to 401(K) and IRA, for details)
5 Building Emergency Reserves : – Prepare for the unexpected , financially. Conventional wisdom says that you should have approximately six months of living expenses put away for an emergency. However, it depends on how expensive the emergency is, but this reserve will help you a lot.
6 Saving For Big Purchases : – Never buy these big purchases like car, plane tickets for vacations etc. with consumer credit. Get into the habit of saving for your larger consumer purchases and not through high- interest consumer credit.
7 Long Term Care : A Plan In Mind : – By our 50th birthday, it occurs to most of us that we really will get old and may require skilled nursing care. But how to pay for it? Long- term care insurance can be an excellent tool. So, plan for it.
8 Mortgage : Repay The Balances : – Entering retirement with a paid- off mortgage is a small goal. But its advantages are very many. Try to repay all the mortgage balance before retirement. This will help you enjoy your retirement life with a lesser amount, when your paychecks stop.
9 Insurance : Reviewed and Adjusted : – Life changes, and so should your insurance. Stick with cheaper term insurance. When your children have grown up and are of their own, you may be able to drop life insurance. Similarly, take a look at you home and car/ auto insurance limits. As for health insurance, review your health insurance needs and costs and up-date your health insurance accordingly.
Top Financial Goals : –
1 Have a well- stocked Emergency fund.
2 Get out of Debt- Completely.
3 Plan for early retirement- this will help you to review your savings.
4 Create multiple income streams – like starting your own side business, dividend income or returns from investments.
5 Have enough insurance to cover contingencies.
6 Be able to live on less than you earn.
7 End any addiction to stuff that you may have.
8 Plan to Do work, that you love even after retirement.
9 Plan to leave your financial house in order upon your death- create an estate will.
CONCLUSION : —
Defining your goals, long-term and short – term would help you to live within your means. But your goals should be SMART.., properly defined which meets your needs, which generally differ from one individual to another. Good detailed planning, even at this advanced stage of your life, would help you live a comfortable, enjoyable and stress- free long life even after retirement. While establishing your financial goals, it is advisable to take the views of your spouse into consideration. This will make implementation of your goals easy and your family life harmonious.