People typically enter the workforce with the intent to achieve financial literacy and stability. However, the goals don’t stop there.
Most Australians will agree that they also work and earn money to prepare for their golden years. Retirement without financial worries is one milestone that many adults strive to achieve. After all, the years after you have officially retired is meant for relaxation and self-exploration.
Now, you might not have the peace of mind to do these things if you’re worrying about outstanding debt. Below are ways to help you prepare for a debt-free and stress-free retirement.
1. Look into Your Finances
Before you create plans for retirement, you must first check if you’re prepared for the years ahead of you. It would be best to look into your finances as soon as possible. Crunch the numbers and consider your monthly earnings alongside your regular expenditures.
The general rule is to save at least 20 per cent of your salary each month. If you haven’t been doing that, try and see the areas you can cut back on, such as entertainment fees or eating out expenses.
While you’re at it, you also need to make sure you’re on top of all your loans. Missing a payment or two may be detrimental to your glorious golden years. If you’re unsure where to start, you can always work with a financial advisor to get your affairs in order.
2. Get Rid of Unnecessary Debts
It would do you good to free yourself from the grip of debt without delay. There are several ways you can go about this process, one of which is reducing your monthly debt obligations with the help of your lenders. For instance, you might lower your interest rates as long as you’re a reliable borrower, which can save you vast amounts of cash.
There’s also the option of consolidating your loans. If you’re juggling multiple loans, you can combine them into one and lower your total monthly payments. A consolidated loan will help you save more money to invest in other areas.
Lastly, you might want to settle the easier debts, such as your credit card statements. These credit cards are revolving lines of credit and can have higher interest rates than other loans. If you don’t pay off your credit card debts first, they can increase even more when you pay only the minimum amount every month.
3. Start Budgeting
It’s never too soon to start budgeting. If you haven’t been doing so, you can try the 60-20-20 rule, which states that sixty per cent of your monthly salary goes to paying for your needs, twenty per cent for your wants, and the remaining twenty per cent for savings.
Should that prove ineffective for you, you can always work with a reputable money coach to get budget advice and a better grasp of managing your finances. It would help if you also considered the lifestyle you wish to pursue in your golden years during this process.
According to the Association of Superannuation Funds of Australia (ASFA), a comfortable lifestyle will require you to spend at least $44,818 a year. Meanwhile, a modest lifestyle demands at least $28,514 a year. Of course, the number will go up if you have a spouse.
Ending Note
When planning to enjoy your golden years, you cannot afford to have outstanding debts, given that they can get in the way of your relaxation.
You must start preparing as soon as possible to ensure you live a stress-free life in your retirement. Use the tips above to help you prepare for retirement and enjoy the lifestyle you’ve worked hard for.
If you’re looking for the best financial advice on the Gold Coast, consider working with New Wave Financial Planning. We’re a financial advisory firm striving to provide tailored financial direction to our clients. We offer advice on budgeting and cash flow, insurance, and retirement. Get in touch with us today!
