Becoming a millionaire isn’t always about huge paychecks or lottery wins. Many people reach that status by simply saving throughout their life and living a little below their means. Here’s our scoop from listening to a number of financial planners on the key steps to living your best life after the age of 65.
In your 20s: start saving
As soon as you start working, start saving! Experts recommend putting aside at least 20% of your income. Even if you kick off your career with a minimum wage, you’re already in a position to do that. Sure enough, it’s more than the pocket money your parents were giving you and you’ve managed to survive!
Set this up so that 20% is automatically transferred from your main bank account to the one you’re using to save. That way you’re not even giving yourself a chance to rely on that money. Start with a special savings account as this will give you interest every month! This type of account also normally charges you a small fee for dipping into your savings more than once per month – great motivation not to do so!
In your 30s: live below your means
The 30s are usually the time when people spend the most money. We build families, have kids, buy a home. And we also start to earn more and have a dual income for the first time in our lives, which brings in new materialistic goals like a better car, bigger TV and vacations further away from New Zealand. This time in our lives is also known as ‘lifestyle creep’ – the tendency to spend more as you earn more.
The key idea for this decade is to live below your expectations and to make sure you’re not making poor financial decisions that carry into the next decade. In other words, earn more than you spend. Sarah Stanley Fallaw, author of the book The Next Millionaire Next Door: Enduring Strategies for Building Wealth studied the lives of over 600 millionaires and writes that most of them never purchased a home more than three times their annual income. Sounds unrealistic for Tauranga, but that’s the goal!
In your 40s: grow your income
This decade is the right time to ask for a raise. You’ve been working long and hard, you’ve grown as a specialist and become a valuable member of the team. So what are you waiting for?
Another way to grow your income at this stage is to find sources of extra income. Monetising your hobby, for example, is a great idea. Many people find joy in selling their creations at the weekend markets or in starting courses to share their knowledge with young professionals.
In your 50s: teach your kids financial independency
The decade before retirement is a crucial one. The most important thing to do right now is to teach your kids and younger family members to make correct financial decisions and to control their income properly. There are so many families who don’t plan ahead and end up spending their life-time savings on supporting their kids’ studies, start-ups and travels! In the United States, for example, 72% of parents admit they put the financial needs of their grown-up kids ahead of their own needs, rather than saving for retirement.
And while there is nothing wrong in showing support and care, make sure your own pocket doesn’t become empty!
Another important thing to do in your 50s is to have a closer look at your retirement plans. What will you do with all that free time? Are you going to travel? Are you downsizing or, on the contrary, going to buy a huge farm and breed alpacas? Visualise your dreams and make sure your savings will make these dreams come true!
Images: Freepik, Pressfoto / Freepik
