Five Tips from the Super Savers: How to easily plan your retirement life
Everyone has different definition of ideal retirement life. Some people want to travel around the world, while others may wish to buy overseas properties as vacation homes. There are also some who would choose to spend more time with their family. Whatever way you choose to retire, you should always include a retirement savings plan. Start early when you are young, and you will be able to enjoy the compound interest more effectively or even bring about unexpected returns.
Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit. Just like the snowball, principal generates interest, the principal together with newly generated interests continues to create greater interests, which can largely increase the saving value in the long run.
For the third year in a row, Principal Financial Group conducted the Principal® Super Saver Survey and summarized five saving tips shared by the young and successful Super Savers.
1. Live within your means
You don’t need to eliminate all the fun, as long as you follow the principle of "never using your future money" and to consume within your own scope; small changes can make a big difference over time. Start by creating a budget and find ways to live on what you make. How do super savers achieve this?
Sacrifices super savers make:
43% Drive older vehicles
41% Own a modest home
41% Don’t travel as much as they’d prefer
40% Do DIY projects instead of hiring outside help
2. Be smart about debt
To be more specific, super savers suggest paying off your credit card balance every month. As all debt involves interest, the interest on some loans could be so huge. Therefore, if debts are paid off early, more cash resources can be used for investment and savings to achieve your personal financial goals.
3. Plan for retirement
Imagine your retirement life and make a plan to achieve it. The most effective way is to treat your retirement saving as a monthly bill you need to pay. Save part of your paycheck to your retirement account allows you to pay your future self, first.
Among super savers, 71% claimed that they started saving for retirement when they were in their mid-20s, for example, they put at least 10% of their monthly pay into their retirement account. And increase your retirement savings each year you receive a raise.
4. Set up an emergency fund
The main purpose of setting up an emergency fund is to prevent unexpected things from undermining your long-term savings plan. Super savers typically put most of their money towards improving their financial situation which includes having an emergency fund. About 96% of super savers have one of these, and about two-thirds of them have four or more months of living expenses stashed away.
5. Keep learning about personal finance
Super savers in general like to keep themselves abreast of personal finance and retirement management.
Investment involves risks. This information is for general reference only.