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In a time where instant gratification is preferred over long-term investments, is it still possible to get that fat retirement savings account at 30? Of course, it is! Just be sure to avoid these spending mistakes to enjoy your retirement earlier than you ever imagined.
by Jeanne Jampac, 07 December 2017
When it comes to aiming for retirement savings at 30, it’s all about planning ahead and committing to your goal..
A fat retirement savings account at 30 sounds like a stretch, especially at this age when more and more Millennials would rather spend their money living in the now than saving for the future. While it may be true that money can’t buy you happiness, it can, however, afford you a future free from uncertainties and financial instability. Don’t wait until you have to catch up on your retirement savings or, worse, have nothing set aside and end up working every day of your life. Here are spending mistakes you need to avoid now to look forward to a comfortable—early—retirement.
1. Failing to Plan
Like any other endeavor in life, you need to plan your retirement savings. You need to set goals—define them, write them down, and commit to them. This way, you can keep track of your progress and perhaps even surpass your own expectations.
They say that your retirement savings should match your annual salary. If you are earning PhP300,000 a year, you should have saved up at least PhP300,000 by the time you’re 30. Now that you have a way to measure it, you can start breaking it down to annual or monthly targets to make it more attainable and less overwhelming.
2. Saving Too Little
Practically no one in their young adult years, except for a few, would willingly allocate a substantial portion of their income for retirement savings. Some would tend to overspend for the little luxuries in life, things they like to call “investments”—clothes, shoes, smartphones, cars, and travel. Others deem it wiser to pay the bills first before saving, in case their budgets fall short. With these mindsets, it would be really difficult to save for anything.
One way to avoid “temptations” and compel you to live within your means is automating your savings. With this, a portion of your income will go directly to your retirement savings account and you would be left with only the money you are allowed to spend. Banking any extra cash you would get, a performance bonus or a birthday gift, would also help boost your retirement savings.
3. Spending Too Much
The bulk of your income goes to housing, food, and transportation expenses. While you don’t have to necessarily let go of all of your creature comforts, you can endeavor to lower your lifestyle costs as much as possible in order to save up for the future.
There’s what they call the 70-20-10 Rule, where 70 percent of your income goes to living expenses. Imagine cutting that down to 50 percent and reallocating the extra 20 percent to savings. There are many ways in which you can lower your costs of living. For instance, you can share an apartment with friends and share costs instead of paying for everything yourself.
4. Keeping Up with the Joneses
They say that unhappiness stems from comparing yourself to others. If you keep comparing and competing with everyone else, you will always end up dissatisfied. Instead of buying that brand spanking new iPhone or traveling to trending destinations for an Instagram post, spend only on what is truly necessary.
Smartphones, for instance, according to the Consumer Technology Association, last 4.7 years. Make it a personal challenge to make your phone last as long as the average lifespan before replacing it. The same thing applies to all your personal belongings. The longer they last, the less you have to spend on frivolous things. Quality over quantity, always.
5. Having Only One Source of Income
How much you save depends on how much you earn. Naturally, if you only have one source of income, you are limited within the confines of that single paycheck. In which case, you might want to start thinking of ways to generate extra money.
First, consider having a part-time job on top of your 9-to-5. Remote jobs are gaining popularity these days and for a good reason. Artists, IT professionals, and writers are just some who can earn extra income at home by sparing an hour or two of their day.
Second, consider investing in bullish markets. Of course, investments can be risky but with proper research and balance between risks and rewards, you will be able to reap high returns in the future.