The House has recently approved a bill lowering the optional retirement age for government employees from 60 to 56, but is this relevant to most of us?
I have known not only government employees but also those working in private companies who are not just ready yet to retire even at age 60. Their reasons? They still got loans payable, no savings, or still have kids who are studying.
Most of all, some are not even sure if they’ll receive a retirement fund from the government or the company they’re working for.
There are only two things that can happen during our retirement.
It can be our longest holiday where we just enjoy our lives.
Or it can be our longest nightmare where we suffer financially and become a burden to our next generation.
Obviously, we can’t retire if we don’t have the funds to sustain us. The problem is most, if not all, working adults dream of enjoying a comfortable life after retirement but don’t really know where to start.
Never fear because we have compiled 4 tips that will set you on the path to financial independence:
1. Set a Target Fund
Before executing a plan, you need a goal. You can save and save but how do you know when it is enough? Start by knowing yourself, or more specifically, your expenses. Try answering these questions:
- How much will you need for basic living expenses?
- What about your need for luxuries such as travel, shopping, etc.?
- How much will you need for emergencies like car and house maintenance and health problems?
- At what age do you plan to retire?
By answering these questions, you will be able to compute not only your monthly and yearly expenses but also how much you can save and how much you need to save to retire financially independent.
2. Acquire Protection Plans
So now that you have a goal in mind, you need to add support. By the time of your retirement, you would have assets to take care of like a house, a car, and even your own personal health. The emergency funds you have set aside might have a hard time covering the expenses of a high hospital bill or a vehicular accident. Since you want to be financially independent, you don’t want to avoid putting the burden of excess cost to other family members. The answer to this is availing insurance plans.
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The earlier you start the better since insurance is cheaper when you’re younger! This is because, at a young age, you are less likely to have some health issues, and applications for insurance are hassle-free.
There are many plans available right now so do your research independently or consult a financial adviser to know the best plan for you!
3. Learn about Investments
Most people are too intimidated to try investing because they associate it with high risk and high reward. This is not always the case though. There are investment options that are less risky with stable growth. Again, the key here is educating yourself and taking action as early as possible.
Your financial adviser will most likely offer you investment options as part of your insurance plan as a startup. These are called Variable Universal Life Insurance (VUL). This makes investing a lot easier because you won’t have to be well versed in the stock market in order to reap the benefits. Aside from VUL plans, Mutual Fund and Unit Investment Trust Funds are other financial instruments that make investing a lot easier.
For a more hands-on approach, you can try setting up an appointment to a Financial Advisor and ask about VUL and Mutual Funds, or opening an account at an online broker and researching the stock market yourself. But only do this once you are more comfortable with investing your money!
4. Build Passive Income
Lastly, retirement doesn’t mean you’ll stop spending. You will have to deduct from your savings but you wouldn’t want to run out of money right? The final answer to financial independence is passive income. Even without investing, building a stream (or two) of passive income will ensure that your account will always be replenished even while you sleep. So what are your options?
- Rent out assets (apartments, condo, vehicles, etc.) not just the traditional way, but also explore options like AirBnB or Grab.
- Start a business. This can range from something as simple as baking cookies to buying a small plot of land and contract growing livestock. You even have the option of opening an online store to reduce overhead costs
- Create and license content to earn royalties. If you write a book and sell it online like on Amazon, you can earn as much as 10% of each sale. You can also take generic photos and license them on Shutterstock so that every time someone downloads your picture, you will also be paid royalties.
Of course, there are many many more things you can do so don’t be afraid to try something different!
What are you waiting for? The future starts today! Be retirement ready as early as possible!
Christine Caranyagan is a Certified Investment Solicitor (CIS), Associate Wealth Planner (AWP), Estate Planner (AEPP), and Agency Leader of the Philippines (AALP). She’s a 2019-2020 Macaulay Club Awardee, and a 5x Medallion Qualifier as a Licensed Financial Advisor.
Her mission is to help fellow Filipino people achieve lifetime financial security & healthier lives.
If you want to learn more about financial planning, you can contact her thru her personal contact number 0935 7368 619, or send her a message here.