Are You On Track For Financial Freedom In Your Retirement?
Student loans, business loans, car loans, mortgages, credit cards — there are hundreds of ways to get into debt. In a capitalist society, it’s likely, most people, certainly people that have studied beyond school, would have owed something to somebody at some point in their lives.
In that position, a lot of the money you earn can feel like it is somebody else’s. Perhaps only a small percentage of it is yours to spend. The good news, however, is that once you’ve paid it off, you will feel a huge sense of relief and freedom.
If you enter your retirement free of debt, you have the chance of experiencing the best times of your life in your final years. Not only do you finally have the time to do all the things you’ve dreamed of, but you have the money to do it as well. You should even have a nice little nest egg to leave your loved ones when you finally pass.
Financially Independent
In 2013, a survey found that only 44% of Americans claimed that financial independence was being free of debt. A further 26% of Americans defined financial freedom as having enough money for emergencies, and 10% identified it as being able to retire early.
Perhaps the aptest definition is from the author Jonathan Chevreau. He said that financial freedom was achieved by people that work because they want and not because they have to.
Whatever your position, your retirement years should be free of worry and stress. If you are not on track for financial freedom in your retirement, you should think about doing so as soon as possible.
Five Methods
The following five methods may sound simple and even obvious, but they are often overlooked.
Pay Off Your Mortgage
This is perhaps the basis for financial freedom. Owning your own house gives you a sense of security, financial and otherwise, that few other things can provide. No longer do you have to worry about making your mortgage payments each month. All you need is enough money to pay off your bills.
Some people who are unable to pay off their mortgage sell the house, pay off the mortgage and buy something cheaper. Often they buy a property that suits their needs in retirement.
Sometimes it can be another country where property costs less. Other times they may sell the house and use the money to pay rent. One should always keep in mind the financial advantages of being an expat.
Find sources of income even when you’ve retired — An extra source of income is often one of the most overlooked methods. Sometimes people turn away from it because they don’t think they can learn a new skill. It’s simply untrue and in fact in retirement people have more time than ever not only to learn something but to put all the wealth of their experience into developing it into something special.
In their retirement, people have become freelance writers, photographers, carpenters As long as you don’t limit yourself, the options are endless. Some options, such as film extra work require no learning or experience whatsoever. Just remember whatever you choose it must be something you want to do and most of all, enjoy.
Start Developing Good Spending Habits
If you are in debt or struggling because you spend too much, it is perhaps time to carefully and honestly examine your spending habits and make the necessary changes. What could you stop wasting your money on?
It could be as little as those two coffees you buy at the cafe during the day or as a big as exchanging your car for a cheaper model. You should find that anything you change will improve and not reduce the quality of your life. For example, it is usually healthier to eat at home and to cycle to work.
By assessing your spending habits, you can achieve two aims. Firstly, you can save more money in your pension and secondly, you can develop good habits that will continue into your retirement.
Hold Back Some of Your Gross Income
Some people suggest that you should start saving 20% of your income each month in preparation for your retirement.
A good idea in practice, but of course, most people cannot afford to put aside that much money each month. Particularly if they are paying off debts, don’t worry though this is not a figure set in concrete. If you — like most people — can’t save that amount, save what you can. Even if it’s as little as 3–5% per month, it will soon build up.
Invest in the Stock Market
If you are uncomfortable with investing in the stock market, or you don’t think you have good enough understanding of it, remember most people trade in the markets through a broker. You won’t necessarily need any expertise yourself. If you find an excellent broker he or she could assist you in building a nice nest egg for when you finally retire.
How to Plot Your Financial Freedom
The best way to plot your route to financial freedom is to hire a financial advisor. It will initially cost you some money, but in the long term, it will save you thousands. He or she will work out your income and expenditures and, in great detail, go through all the ways you can achieve financial independence. You can do it by yourself, but then there is a danger you could miss things out. A financial advisor — who will always be working in your interests — is unlikely to miss anything. Furthermore, they know all the different types of accounts and the changes in the law that could affect them.
