There are a lot of retirement blunders you can make at the start of the year and these can hurt your chances of reaching your retirement goals. You could be aiming for a specific amount and year to retire and making mistakes along the way could prolong reaching that goal. This should be enough reason to make you be more careful about such mistakes.
However, there is no way to know when you will make mistakes or even when unforeseen incidents will occur that will lead to retirement problems. But this does not mean you cannot lessen the mistakes you make. The more you educate yourself about your retirement needs, the better off you will be. In order for you to do this, you need to define what retirement is going to be for you.
Is retirement going to be staying at home and going through your favorite books and maybe even publishing one of your own? It is also possible that retirement means spending your day at the farm and tending to animals or making sure your garden is sprawling with fresh fruits and vegetables and even flowers. Not knowing what you want to do in old age is one of the retirement blunders a lot of people make.
Once you have an idea what it is you really want to do in retirement, planning for it becomes a lot much clearer. As you do that, you can now identify areas where it could get a little challenging which can lead to blunders. This is important as CNBC shares about 15% of Americans have no retirement savings at all. To help you out, here are some of the most common mistakes people make when they start planning for their golden years.
Not prioritizing yourself
A lot of the causes of retirement blunders boils down to the fact that you do not prioritize yourself, or at least your future self. There are a lot of things in life that will tell you to live in the present and that is also true. However, you also need to make sure that as you do that, you are also saving enough money for your future needs.
This can be a tough concept to come to terms with for the younger generation who are just on their first job trying to build a career. Retirement for them is decades away while student loan payments, as well as rent and food, are immediate expenses they have to attend to. Saving up for an event decades down the line seems unimportant at this time.
It is also possible that people could be in denial that they are just a few years away from retirement and they do not want to think about it. As a result, saving up for their golden years are left on the sidelines. Remember that the sooner you plan for retirement, the better your chances will be of retiring when you want to and not when you need to.
Spending too much on bad habits
One of the many retirement blunders people make is spending too much of their resources on bad habits. You have to understand that your resources do not refer only to your funds but it also covers your time and most especially your health. You need to make sure that you use these very limited resources wisely.
If you are spending a lot of money on drinking and smoking, you are literally just wasting away your resources. You already know that drinking and smoking will only damage your body in the long run when you overdo them. There is nothing wrong with enjoying a bottle or two with family or friends but make sure you get to focus on the time together and not the bottle on your hand.
Gambling is one of the worst ways you use money because you are wasting away all your hard work and betting it to win. Now, you might get lucky a few times and actually win some money but your losses over time will still outweigh any winnings you can get. After you win, you also feel the urge to play some more where you may not mind a few losses thinking you will win big again. You, later on, play away what you have won and then some leaving you in debt.
Adding up small but recurring payments
If you are looking for retirement blunders that put your savings at risk, one of them could be hiding in plain sight. As you look at your household budget, you might notice small recurring payments but you haven’t been paying much attention to it since the amount seems insignificant. However, these recurring payments might just be the leak you are looking for.
There are times when you cannot seem to figure out where your money is going every month. You try your best to find the leak but cannot pinpoint the exact causes. A possible reason for this is that they could be small expenses that you usually do not pay much attention to it. What you need to do it add them all up and see how much they cost at the end of the year.
Try to look at your recurring payments and identify the ones you can do away without. It is also possible that you have recurring payments for similar services such as music and even movies. If you are not using your gym membership, cancel it and simply go for a run or join free classes at the park. You can sign up again for that gym membership when you start to feel the need for it.
Thinking investments are a risky idea
One of the retirement blunders a lot of people make is thinking that investments are a very risky idea and that they need to stay away from it. The truth of the matter is that any type of investment has a certain level of risk involved. It is up to you how much risk you are comfortable with and that will help you decide what type of investments you can take up.
The general rule of thumb when it comes to investments is that when you are taking more risks, the return is potentially big. When the risks are lower, the returns could be small as well. What you can do is to take more risks while you are still young because if you lose money, you still have time to recoup your losses. As you get older, slowly transition to safer investments so you protect your capital and earnings as well. Money site shares that this is choosing between the return of principal versus return on principal.
If you are scared of investments, start small and find your comfort level. You will get used to it over time and have an understanding of exactly how much you can put in and where. When the time comes that you are nearing retirement, make sure your investments are in order and know how you can cash in on them when you need them for retirement use.
Putting your money in depreciating assets
There are good investments and then there are some questionable ones and deciding which is another thing you need to know to avoid retirement blunders. There are people who believe buying a new sports car is an investment but it depends on the use and purpose. If you just want to parade it around town to get attention then you already lost money the minute you drove it off the dealer.
However, if car purchase is so you can sell it again at a premium, then that is a business you can consider. If you know a lot about a certain niche in cars and can restore the vehicles into prime condition, collectors would spend a lot of money getting their hands on that unit. Of course, you also need to factor in the time you have put in and expenses you incurred to know how much you really earned when you finally sell it off.
It is better to make investments that appreciate over time such as real estate. You can start with your own home and when you get to pay it off and still in your prime earning years, get another one and have it pay for itself by renting it out. Soon, you get to pay it off and you continue on with another one. Sooner or later, you either have steady income coming from rent or you sell them and have a big boost on your retirement fund.
There are a number of retirement blunders you might make in pursuit of that beautiful life in your golden years but you just have to move forward. Learn from them and do better the next time around.