Take some time to think about what you would be doing during your ideal retirement. Maybe you would take a trip you have always dreamed about. Or you might be taking the time to start a hobby you have always thought about. An ideal retirement is different for every person, but the financial goals that will get you there are relatively similar for most people. Understanding these goals will help you figure out the next steps.
Prioritize Retirement Savings
The sooner you start saving, the more money you will be able to set aside. That’s partly because you will be saving for more years, but it is also partly because you can take advantage of the power of compound interest. Your money will have more time to grow in a savings account when it sits there for longer. It can be hard to think about saving money for your retirement, especially if you are finding it hard to make ends meet as it is. That’s why you want to look for ways to cut back on monthly spending. One option is refinancing your current student loans to a new one. Not only can it give you better repayment terms, but it can also give you a lower interest rate if your credit is better now.
Rainy Day Savings
Surprise expenses can crop up anywhere, and retirement is no exception. Whether it is a new roof, car repairs, or a medical bill, having an emergency fund during your golden years can give you peace of mind, even if something does come up. You will want to have enough funds in this asset reserve fund to cover any potential expenses. The investments should be kept in a liquid form that allows you to tun the funds into cash. That might be a savings account where you can quickly transfer the money to a checking account.
Whether it is travel or hobbies, especially if you hope to retire early, consider the activities you want to spend your time on when you have retired. Even if you only plan on going out to eat every now and then, you will want to consider this is a potential expense when you are creating your plan. It is a type of cashflow goal, meaning you should fund it with a variety of income sources. While you might not be able to take expensive vacations when funding it, you can often treat yourself every now and then.
You may want to be able to give the remainder of your wealth to your kids or even to charity. This might be a lower priority for investors, because if unexpected expenses crop up or you need expensive end-of-life care, there might not be much left. Still, if you want to save your money to give to others, you may want to keep them in a more liquid investment so you can transfer it more easily. You can also consider non-monetary ways of investing in other people, such as doing volunteer work.