5 money moves that you should avoid to retire rich
There is a plethora of financial literature on the internet advising you on how you can grow a retirement fund so that you can live a comfortable life post retirement. This usually includes advice on ways in which you can save enough and maintain your current lifestyle even after you stop working.
But what would you do if you have plans to accumulate enough money so that you are considered wealthy during retirement? Of course, there is no magic potion that can render you super-rich over a fortnight. One thing that can help is a smart investment strategy that leads to disciplined financial moves. This includes trying to earn a little more, investing in a more aggressive manner, and doing both of this for a longer period of time.
In line with this, you should also take special care to avoid some financial pitfalls that can cause serious harm to your retirement planning. Few of these bad money moves have been listed below,
1.Not buying insurance
It is commonly believed that building a retirement corpus requires smart investing strategies. But it is not clearly understood that protecting the retirement kitty is of great importance as well. Consider a scenario in which a family member is hospitalised following the diagnosis of a particularly serious medical condition. Covering the hospitalisation costs can actually set you back by a good amount of money.
This is where a good health insurance cover comes into the picture. You can opt for a family floater plan that protects your entire family from hospitalisation expenses. In times of rising medical costs, this would provide you the much-needed assurance to keep you calm after a worrying diagnosis.
If you are in your 30s, you should also consider buying life insurance that offers you long-term protection. The advantages of being protected with life insurance are many, and like other forms of financial planning, it is best to start early. Invest in a life insurance plan today to ensure you have a bright financial future ahead.
2.Taking big loans
Salaried individuals do not have a problem with arranging funds for their various interests/needs, such as purchasing a house or a car. For instance, almost every urban household today has at least one car. With the increase in disposable income, people are opting to buy larger and high-end cars to establish their status symbol in society.
Most of the car purchases today are funded by car loans to alleviate the impact of taxation. It is always advisable to not indulge in a big debt such as the financing of a high-end car, as this can prove to be detrimental to the overall health of your savings as you will end up paying huge amounts as monthly EMIs to repay your car loan.
Moreover, you should also exercise caution while taking personal loans for funding small-term aspirations, such as financing your next travel to a foreign location. Loans like this can accumulate to become the biggest obstacle on your road to a comfortable retirement.
3.Starting investments late in life
Young working professionals today do not seem to understand the importance of planning for their retirement early. To them, retirement is a distant financial goal and saving for it can be shoved to a later date. Unfortunately, this strategy will only bring you trouble later on. It should be noted that accumulating a substantial amount of money in your retirement corpus can be a reality only if you start planning for it early. The task becomes massive when you start late, say in your 50s.
This could be one of the reasons why the government offers a fundamental retirement planning tool - the employee provident fund, when an individual earns his/her first salary. Starting early gives you an upper hand in the form of the compounding effect that multiplies your cash reserves.
4.Investing in a very conservative or reckless manner
If retirement planning is your goal, it makes sense to invest in assets that guarantee higher returns. Of course, the risk element associated with such investments is high. But if you have started investment early on in life, you can afford to take some risks.
You can consider investing in mutual funds to beat inflation and adequately fund your retirement years. You should know that safer investment options such as fixed deposits and EPF may prove to be inadequate avenues to park your hard-earned money in.
On the other hand, it is not advisable to be reckless in your investment strategy and pin your money on highly volatile investment avenues. In this context, betting or gambling are a big no-no as well.
5. Using retirement savings for other purposes
It is seen that many of us actually use the money set aside for retirement to fulfill our short-term financial goals. When you encounter a situation that demands contribution of a considerable amount of money, you should ideally weigh it out with the impact it would have on your savings. Only when you find that the need is paramount should you think of funding it from your retirement kitty.
You should always keep in mind that it is possible to find a loan for most of your needs today, but not for living the life that you dreamt of during your retirement years. So, spend less than you earn on a consistent basis and remember to plan and invest for your future as early as possible.