Preparing for retirement is one of the smartest things that any person can do during his or her working years. This can be done through a variety of ways but, often, the most effective retirement strategy is the simplest. And that is learning how to live on a small retirement budget now.
This is a common piece of advice that financial experts and fund managers will tell you and it perfectly applies not only to those in the middle class but also, to some extent, to other socio-economic classes as well.
So before you search for retirement program samples and plan out your retirement party, you need read check on the rest of this article where we further discuss and provide a deeper look on how small or limited budgets can help make your retirement years happier. Read on…
You can retire debt-free
Living on a small budget during your working years allows you to set aside more money for other more important aspects of your life. For example, you may be using the bulk of your income to pay for debts, save for your children’s college fees, or contribute more on your 401(k) plan.
Perhaps the most important thing among those mentioned above is if you are using more of your current income to pay off your debts. This is because when you make it your priority not to get into unnecessary debt throughout your working life, your debts will not accumulate and will not take a huge chunk out of your retirement money later on.
Of course, there are good debts (like getting a mortgage) so you should make it your top priority to pay back these debts while you are still working. This way, you do not have to worry about them when you finally retire.
You will not have a problem with adjusting to a decreased source of income
For most of us, retirement means that there will be a decrease in our monthly income. So if you have not lived frugally throughout your working life, you may have a tough adjustment period. In fact, if you have lived within your means throughout your working life, you may already have found other ways to supplement your source income to fund your hobbies and buy things you may want to without touching your monthly personal budget.
In addition, if you have already practiced and are used to living on a small budget prior to your retirement, you will not find it any different when you finally retire with a limited monthly pension fund. In this case, it may be best to look up personal budget examples that you can follow and recreate for your retirement plan.
You are content with your financial status
When you know yourself, what you want, and how to implement the different steps you can do to achieve your goals, you are building the road towards a happy retirement and a comfortable life. And the simple act of living within your means now is a good start to achieving all that.
So when you finally retire, you already have spent years preparing your retirement portfolio and have achieved some of the things that you were aiming for financially. Hopefully, at this time, you have also achieved a sense of contentment towards how you have handled your finances up until this time.
It is not easy achieving this sense of self-awareness and contentment. After all, it is human nature to want more and more and more. Most of us will have all our lives working for it. Since you are reading this article about preparing for your eventual retirement perhaps you are already working towards the same happier and contented end game.
You will save more
In banking parlance, there is something called compound interest. So if you have set aside most of your monthly income as savings all throughout your working years, this amount will increase over the years. Upon your retirement, you can then begin to enjoy the interest earned on your savings.
Of course, it takes a lot of planning in order for your total savings amount to accrue into a significant amount in terms of interest. That is why while you are still in your working years, you should begin to use personal budget examples plans and determine the best way to achieve your retirement savings goals.
Saving your money in the bank and relying on government-mandated retirement savings plans may not be enough when you finally retire. As early as now, it is best to begin looking into different investment vehicles like government bonds, balanced funds, mutual funds, and more.
You become more financially savvy
Learning how to live on a small budget throughout your working life will undoubtedly help you become a more financially savvy person. This is a helpful skill to have especially in the state of the economy today.
When you living within your means, you also appreciate things and experiences more. You do not take them for granted easily. This gives you a more realistic and empathic view of live. And if you have practiced this throughout the years, you will be more than prepared to face a new stage in your life when you finally retire from the workforce.
You will feel less stressed
Another positive effect of learning how to live on a small budget is that you will feel less stressed about your life, your financial status, and your future. This effect may entirely be psychological in nature and may largely different from person to person depending on how they perceive money and success.
But, overall, most people will become less stressed knowing that they have funds allotted for anything that may occur to them and their respective families when they retire. In a highly volatile economy, this is a good thing.
All these things are possible thanks to a frugal way of living during your productive years. However, this does not mean you have to be a total penny-pincher throughout your working days. Know that there is a fine line distinguishing the two.
Also, remember that living on a small budget while preparing for your retirement is not the same as living a small and uneventful life. If you want a truly rich and truly happy retirement, you will find a way to make your retirement years a truly golden age while not limiting yourself from experiencing all the best that your life can offer now.