5 Ways to ensure you need not compromise on your lifestyle even when you retire
For professionals in the middle of their career, retirement is a prospect that looms on the not-too-distant horizon. You think of retirement with a mixture of anticipation and dread. You have all the time to enjoy the fruits of your labour – pursue your hobbies, spend quality time with loved ones, travel the world. So far so good.
However, there is also the nagging worry about finances: if you’ve saved enough, if you started saving on time, if your post-retirement income will sustain your lifestyle. Of all the retirement worries, the most common is arguably the fear of not having the finances to continue living in the same manner.
But there’s no need to worry; timely research and careful planning can help your financial situation post retirement. Let us explore how you can begin planning for your golden years so you don’t have to compromise on your lifestyle when you retire.
- Compile a monthly budget
Every month, list your income sources along with the fixed expenses you incur. Set aside an amount for unforeseen expenses. A good rule of the thumb considers expenses only after setting aside a certain amount of earnings per month towards savings. Savings should never be kept for the end of the month; savings should be the priority when you receive your salary.
- Reduce expenses and save
Even after retirement, you will need to meet certain expenses every month: utility bills, rent, healthcare expenses, children’s education and marriage etc. Expenses such as shopping on the spur of the moment, eating out too often, entertainment, and travel can be limited to a reasonable level. The amount thus saved should be redirected towards your savings.
Begin saving as early as you can. If you have started late, don’t panic. You can still catch up. This is where it gets complicated (a little!) Most people assume that savings means setting aside a portion of their earnings in a bank account to collect interest. Often, interest and inflation rates are not clubbed together.
It is true that interest on deposits is offered by the bank as compensation for your money and to cover the inflation rates in the wider economy. However, inflation rates tend to rise quicker than interest rates. This means your savings have less purchasing power over time, thanks to inflation. For this reason, it is important to start reducing expenses and increasing savings.
- Have more than one source of income
One can never have too much money. Aside from your primary job income, try to earn a little on the side. Perhaps you have a hobby that you can monetise, such as tutoring students. The internet has opened a vast ocean of previously non-existent opportunities. This is where your time management skills come into play. The average millionaire has seven different sources of income. Why should you be any different?
You can also have post-retirement career plans. Consider what you would like to do with so much leisure time on your hands. Start well in advance. Leverage your professional network; find friends to zero in on a freelancing or part-time position. You will soon be able to enjoy your retirement years with the financial security of employment.
- Get rid of debt
It is a good idea to pay off all debts before retirement since repayment dates have to be honoured regardless of your income situation. If all goes well in your financial plan, your assets should generate the same level of income as it did during your employment days so you can maintain the same standard of living.
If you are earning less, you still have to pay off loans, and this means very little income will be left for yourself. Do not take on fresh debt obligations after your mid-forties. If you do, make sure you can transfer them to your children post retirement. Keep an eye on your Credit Card usage. These easy modes of payment are very tempting; you could inadvertently end up with a huge Credit Card debt.
- Invest in income-generating assets
There is a saying ‘If you do not earn in your sleep, you will work till the end of your life’. The idea is to make your money work by itself. Let us take an example: Say you have Rs 10 lakh. Now, you can either buy a car or a shop in a nearby complex. If you buy the car, its value will start decreasing the moment you bring it out of the showroom. If you buy the store, and rent it to someone, you will have created an asset that ensures inflow of money every month. Investing your money wisely will pay richly later on.
Additionally, build a solid portfolio. Compile a portfolio of different assets so that you can increase returns and minimise risk. The most balanced portfolio equation is only 10% in cash and gold, 30% in fixed income, 30% in property, and 30% in equity. You should definitely set aside some liquid assets for emergencies. However, the rest should be invested where their value can appreciate exponentially over time. HDFC Bank has numerous investment services and can help you build a tailor-made portfolio for you.
Ultimately, there is great wisdom in always being prepared. Retirement planning should include a solid health insurance policy that covers all existing and future ailments, injuries, and other contingencies; you should also put in place a comprehensive general insurance policy for your important assets. Make sure you never have to dip into your savings post retirement – not even for an emergency!
Log into your HDFC Bank NetBanking Account to know more about your post retirement investment options!’
Read more on how to ensure that your retirement funds live as long as your do here!
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.