Retirement is an important and unavoidable part of life, and your funds will decide how you can live your life once you are retired. I am going to share 5 important tips for maximizing your retirement savings.
1. Start Early
The early you start investing, the more corpus you will generate for your retirement. According to personal finance expert Pardeep Goyal, while creating a corpus one should consider the power of compounding returns. The earlier you start the more you will get. Don't wait to have a big amount of money to start your investment. Your small amount invested today will earn the benefits of compounding. Thus, even a tiny investment like Rs. 1000 per month can make a difference over time. Analyze your finances and start with as much as you can, you can increase your retirement savings as your financials improve.
2. Be Consistent
Consistency is the biggest tool to maximize your retirement savings. If you are consistent in saving money for retirement whatever is the amount, your money will keep on growing. Do you remember the Snowball effect? In the Snowball effect, a small piece of snow when starts rolling down the hill, adding more snow to it and gradually it becomes more disastrous by converting into a big avalanche. Similarly, your small investments may seem to be of small significance and but they can build big wealth itself with time, if consistently invested for longer periods of time.
3. Automate Your Savings
Now you have come to know the significance of Consistent savings. The effective way to maximize your retirement savings is to automate your contributions. You can open a separate savings account for investment and put standing instructions on your salary/regular income account to transfer a fixed amount to your retirement savings account. Once a specific amount is debited from your savings account, you will get a motivation to invest for your retirement. You can invest that money in a diversified portfolio that may include PPF, mutual funds or even stocks if you have an understanding of investing in the stock market.
4 Diversify Your Portfolio
You can't put you all your eggs in one basket. Your money will not grow either or you will lose all your money if any market crash happens. The best solution is to diversify your portfolio. This will not only help you earn more with less risk but you will also generate money that can beat the inflation rate in the long run. You can diversify your portfolio in 3 parts - Safe assets, medium-risk investments, and high-risk high reward assets. You can start investing some amount in safe assets like PPF, FD and debt funds. You can invest some money in mutual funds with lower returns and low risk like debt funds. Then you can 3rd portion of your savings into equity-based mutual funds or directly in stocks (if you understand the stock market). Invest in quality stocks for a longer time horizon of a minimum of 8-10 years to keep your investment intact from regular market fluctuations. You would have the time to recover if something goes wrong. This will help you beat inflation and maximize your returns from the retirement point of view.
5. Eliminate Your Debt
Debt is the biggest enemy to maximize your savings. Because when you pay extra money in the form interest on your loan amount. If you are having multiple EMIs going on against your credit card purchases, then its an alarming situation for you. See, if you have don't have to pay any EMI, you would be able to invest that money for your retirement. Another thing that people don't consider is that they keep on paying minimum monthly payment without knowing that they have to pay huge interest rates (around 36% - 48%) on their credit cards outstanding amount. Never ever keep any outstanding amount on your credit card. Pay full amount of your credit card bill. You can save thousands of rupees by avoiding credit cardinterest, if you use your credit card wisely and pay full credit card bill within time.
Conclusion
Being debt-free, consistent in your investments and diversifying your money are the best measures to maximize your retirement savings. Be disciplined in your investments and avoid impulsive buying to have a financially stable after retirement life.
Know difference between FD and RD
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