Despite gripes about austerity cuts and the cost of living, many approaching retirement can still take some simple steps to improve their savings.
Here are six tips to help them along the way:
Rainy day money – It’s always a good idea to have some rainy day money in the bank for emergencies or the occasional treat. The worst possible event is something comes along unexpected and wipes you out financially after decades of saving.
Unforeseen events do happen. You can fall ill and have to give up work, for example.
Having a savings cushion helps – and if you need to know how much, think about stashing enough money to live on for six months in the bank. You will lose interest, but you will gain peace of mind.
Save a little as often as you can – Laying aside a small amount of money every month for a long time is better than trying to make up a big amount you cannot afford later in life. Start early, save a little and save often is a great motto.
Look after number one – That means pay yourself before you treat yourself. Savings come first and you can spend what’s left on life’s luxuries or put even more towards your retirement savings. Look at tax wrappers that give relief on savings. If you are an expat, consider a tax-effective Qualifying Recognised Overseas Pension Scheme
Plan your spending – It’s OK having rainy day money in the bank, but you don’t want to keep dipping into the cash. Look at risk, your income and whether you really need that big-ticket item. If you know something is likely to head along further down the line like school fees or a daughter’s wedding, then plan early – that’s why it’s called financial planning, not financial panic.
Review your finances – Don’t go over the top and sit down with spreadsheets every day, but keep an eye on your savings and investments. Take a look at least every two years to see everything is on track. Remember some long-term investments will act differently to shorter term events. Diversify your assets and carefully weigh up risks.
Build a team – Manage your finances with people you like and who can add value to your wealth. Mix risk and reality, but don’t go too far either way. Remember it’s your money and your life you are making decisions about.
The point of these six rules is to make you think about your finances and your retirement – but not so much so the rest of your life passes you by. Don’t forget to enjoy yourself along the way.
