Your formative years in your twenties are a great time to get planning for your life wealth and set yourself up for better retirement. Let’s go through some key tips and methods.
Start saving early
There’s no point in talking about your life wealth if you’re still in the realms of the ‘pay day loans and credit cards’ mentality. If you can afford to start building your money savings early on in your 20s, it’ll be harder to throw your eggs into the ‘discretionary’ basket if you want to be in a position to retire when you are 45 or 50.
Consider the money questions that you could ask yourself. What would happen if I didn’t earn any income? What if I didn’t spend any money? How would it change the way I spend my life and achieve my life goals? How would it change the way I live my life? Millionaire or trillionaire…no shame in being a millionaire.
What you do is up to you, but if you want to retire, you have to start financial planning and get prepared to start saving early.
Saving money is good but knowing when and how to invest it can be even better. You need to be careful not to invest too early into the stock market and you should be investing for your retirement in the future, not your current retirement today.
Research is key. There are several platforms that are easily accessible to the average investor with lower minimum investment amounts and long-term track records that you can use as a starting point.
Monthly budget Your monthly budget should be based on your weekly income. For example, if your income is around Ksh4,500 a day, you will need to cut costs accordingly. Food is expensive and, as such, needs to be reduced in your monthly budget and that means less pizza. Be debt free Having debts in your name can take you nowhere.
Live below your means
One of the most common signs of a good financial planner is the ability to live in a space below your means. Some of you are probably watching your credit card balances climbing, thinking about buying a car that is too small or splurging on a fancy dinner.
That doesn’t mean you should move in with your parents, but it does mean taking a hard look at your spending and living expenses and making a plan to reduce them. Simplify your money system.
The average household has more than 50 different accounts. It’s time to simplify. If your long-term financial planning is to begin in your twenties, it’s better to begin now than to wait until you’re old and gray, still paying for your high-interest student loans.
Protect your assets
A lot of your investments are in some kind of RRSP, so that’s the first place you’ll want to start protecting your assets. The rules around these accounts have changed in the last few years, so now is a great time to review your RRSP/RRIF limits and decide where you want to allocate your savings.
What’s the difference between the two? RRSP – They are tax deductible, meaning you can withdraw money tax-free for eligible expenses, such as down payment on a house or for major home repairs, debt consolidation, or emergency expenses.
As long as you’re not moving to a foreign country, you’ll generally be able to stay in the RRSP when you retire as long as your income is below a certain level. (Read more about RRSP’s here.