18/10/2021
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The 6 simple steps to enhance your retirement saving without compromising your lifestyle.
Pandemic has affected many of us withdrawing our EPF for short term cash flow chock. As our country is heading for recovering face moving down the road. It is time for us to start reviewing our retirement fund. Below are the 6 simple steps to review our Retirement Fund.
๐ STEP #1 Define Your Goal
We need to know how to define our goal before we work on it. We need to be cleared how much we need to fund for our retirement. Without know this figure, we canโt plan for it.
๐ STEP #2 Review Existing Fund
Next we need to figure what are the existing resources that we have from now until the age of retirement.
We need to project how much will these resources that will generate for us when the time that we reach our retirement age.
The common resources most of Malaysia depends on for retirement include EPF account, saving, Unit Trust investment, insurance policies, stocks, and properties.
Add up all these resources with their projected value. See if we can meet the retirement fund that needed in the step 1 we have calculated.
If we do not have sufficient amount to meet the required fund for retirement, then we need to start working on it before it is too late. Even we might have sufficient fund to support our retirement, it is wise we plan some extra in case we need some additional unexpected medical cost at the old age.
In short, the more the better if we have prepare for our retirement fund.
๐ STEP #3 Cut Down Expenses
Review our monthly expenses and see how we can cut down those unnecessary. Sometime you can reduce some of the expenses without compromising your daily lifestyle.
For example pay your credit card on time to avoid late charges; clean up the filter of the air conditional regularly can reduce the electrical consumption.
Keep your tire all inflated. Remove those things not in use from the car. The extra weight will cause the car consume more petrol.
Your driving style might have impact on how much petrol you will consume. Avoid unnecessary accelerate your car and keep your driving smooth. Gentle accelerate your car will reduce your fuel consumption.
Start your goal with small like saving RM100 a month without much compromising your lifestyle and slowing increase the figure.
๐ STEP #4 Increase Income
As we can only cut down our expenses up to certain level. In terms of additional income, there is no ceiling that will stop us. If we are capable, we can generate as much additional income as we can.
We may already have our full time job that will take most of our time. Getting a second income may not easy as we still have other commitment like taking care of our old parent, children at home and we need to allocate time for ourselves.
Therefore starting the second income should be on the passive income. Find way to automate the second income so that it will not take up your remaining rest time or personal time.
A few simple example of passive income like renting out an extra room, an extra car park, interest income, dividend income, royalty income, writing a book or blog that has continue income, multi-level marketing or agency force business that we can leverage on downline to generate income.
Again start with small like generating RM100 extra monthly income. Small amount is always easy to achieve and always give you motivation to take action on it. Slow increase the figure as time goes by.
๐ STEP #5 Invest
We work very hard for money and we should make the money work even harder for us. One of the best way is investment. The investment can be your third income stream to fund for your long term retirement.
By cutting expenses and save RM100 and by generating additional income RM100. We will eventually have RM200 to invest every month.
Every year when you have your salary increment and your year-end bonuses, remember to set aside a small portion of it and allocated into investment. Over the long period of time, it will be very impactful to your retirement fund.
๐ STEP #6 The Power Of Compounding Interest
Compounding interest in simple term is earning interest on interest. The new interest is compute on the previous interest earned and also on the initial principal. With the compounding interest will make investment sum grow at a faster rate.
The longer we allocate time for the investment to grow, the better return of the investment return. It is just like a snow ball, initially the snow ball is very small but if we allow it to keep on rolling and eventually the snow ball will become bigger and bigger.
We need to allocate time for the compounding interest to work for us. The longer time we allocate, the better the return it will be. Therefore we need to start our investment as earlier as possible. We can start with small amount but we should not start with late.
Hope this help to plan out your retirement well.
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