It's that time of the year when we all set goals for ourselves. Whether it's to lose ten pounds, exercise more or something else, most goals are often short term in nature. Sometimes they are achieved, but whether we like to admit it or not, many go down the wayside.
Goal setting is important. Without goals how would you know which way you are headed? Goals should include longer term plans that need to be built up incrementally, year after year. Retirement is one of such goals. It might sound absurd to think of something that might be thirty years away. But people who have gotten there will likely tell you that the earlier you start working towards it, the better the chances are of accomplishing the goal.
Here are five tips as you work through building up your retirement goal.
1. Think long and start early
Average life span is steadily increasing and is currently in the mid-80s for both men and women. Plan to keep working as long as you can to build a portfolio that will support you well into your 90s. Start saving early even if it is a small amount of money today. It's the little drops of water that make the mighty ocean!
2. Keep debt to the minimum
Money is always thrown at you to persuade you to make that impulsive buy -- credit cards, personal lines of credit, overdraft facilities, leases, etc. But is debt a bad thing? If you are borrowing to acquire an asset or to increase your earning capacity, it may actually be a good thing. But if you are borrowing to pay expenses, that will likely come back to haunt you at some point. Pay off debts with the highest interest first and look for ways to consolidate the others into cheaper products such as lines of credit.
3. Make sure you are sufficiently insured
It's not just the expected that we have to plan for but the unexpected as well. Getting the right kind of insurance is a great way to ensure that the unforeseen doesn't derail your progress towards your goals. Take an insurance needs assessment to see how different insurance products fit into your financial plan. A few key types to consider are Life, Disability, and Critical Illness.
4. Save regularly
The more frequently you contribute to your goals the more a part of your life it becomes to save and the easier it is to keep going long term. But there is also another huge benefit to regular contributions which is dollar cost averaging. It takes a bit of math to figure out, but in the simplest terms, buying small bits more often helps to minimize the effect of market timing and actually helps to lower your overall costs during volatile markets.
5. Maximize employer contributions
If you work for an employer who matches part of your contributions, participate in the program. It's not only a benefit to pay yourself first, but any contributions your employer makes immediately increase your portfolio value. If your employer matches 50% of your contributions, that's like instantly earning 50% return on whatever you've contributed.
If you don't lose that 10 pounds you wanted to this year, you'll get another shot at it next year! Retiring is not something you want to have a second shot at doing. Get started early and create a plan your retirement, it's one of your most important goals in life. If you want help, work with an advisor that keeps it simple for you and provides you a lot of value. And say no to that cookie, there's still time left to drop that formidable 10!
Pramod Udiaver is the Co-founder and Chief Executive Officer of Invisor Investment Management Inc., one of Canada's leading online financial advisors that provides personalized investment management services. Passionate about personal finance and a student of financial markets himself, Pramod & his team's mission at Invisor is to simplify investing and help Canadians reach their financial dreams sooner.
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