As a financial analyst, one of the questions that I regularly get asked is the following: How can I sock away enough money to comfortably retire one day? This is usually followed up with a qualifier: I don’t earn enough now, so how will I ever have enough when I reach retirement age? These are valid concerns, especially at a time where rising prices and a tough labor market make it difficult to save money.
If you are living from one paycheck to the next, you understand these concerns all too well. Everyone will tell you that retirement planning and savings go hand-in-hand. You need to be able to cut your expenses and make your dollars stretch further. But how do you go about doing this if things are tight, to begin with?
It’s time to make a plan!
Back in the 1980s, most every TV series you watched had a feel-good message. Think of the Golden Girls, MacGyver, Airwolf, and my personal favorite –The A-Team. This team of mercenaries – hired guns – were always solving problems in the face of overwhelming odds. The leader of the A-Team – Hannibal Smith – typically ended each episode with the following expression: ‘I love it when a plan comes together.’
This is precisely what we will attempt to do here today with our in-depth insight into how you can make your income work for you. In conventional macroeconomic theory, it is stated that saving is a prerequisite for capital formation. This works on a microeconomic level too. In order to plan for the future, the present needs to be effectively managed. This requires the establishment of careful checks and balances, otherwise known as a budget.
All your debits and credits should be laid out in an easy-to-read format. While we can target fixed expenses, there is significantly less flexibility with those. It’s the discretionary spending that typically detracts from building a retirement nest egg. Discretionary spending includes things like eating out, entertainment, cable TV, mobile phone coverage, auto loans, personal loans, credit card expenditure, and the like.
By significantly curtailing your discretionary spending, you will find that your budget can be wrenched from the red into the black. Financial experts recommend that individuals carefully evaluate their budgets to minimize unnecessary expenses. Your retirement is best served by ridding yourself of encumbrances that do you no good in the present. You may have old machinery, equipment or vehicles in your backyard that you can sell and put the money towards your retirement nest egg.
Evaluate your investments
Once you have evaluated your current situation, you can take the necessary steps to plan for the future. You may find that downsizing will best serve your interests moving forward. Once the kids leave home, you may not have a need for a 4-bedroom house, and a condominium may be better suited to your lifestyle. If the whole is the sum of its parts, you can systematically improve one component at a time until you have streamlined things to perfection. Next up is your current investment regimen.
Believe it or not, many people may be invested in a 401(k), a Roth IRA, or various certificates of deposit, without actually understanding too much about what they’re doing. Many of us tend to blindly follow the investment advice of money managers, financial analysts, and investment gurus. What works for them may not always be in our best interests. Unbeknownst to many, every day investors are that many of these fund managers tack on hidden fees, commissions, monthly management charges and even minimum balance requirements to our financial portfolios. These can quickly add up, especially if markets are not performing to expectation.
Lionexo options trading consultants advise clients to take an active interest in the management of their financial portfolios. ‘It is incumbent upon the individual trader or investor to actively participate in the markets. You can derive tremendous personal benefit from understanding the interactions between macroeconomic variables and individual stocks, indices, commodities, and currency pairs. You can enhance your revenue streams by speculating on future price movements of financial assets, without purchasing them outright.’
While derivatives trading is a niche market, it should be considered as a viable component of an overall investment portfolio. Traditional stocks, treasuries or certificates of deposit will always have a place in a retirement portfolio, but retirees can also enjoy the benefits of speculative activity vis-à-vis derivatives trading too.
Save More Money in 2018
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