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5 Principles Building a Prosperous Life in Retirement

Spectr News Theme Isny Dewi R.
02, March 2020
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Prosperous and well-off life certainly become the goals of many people, including when they retire. However, building enough wealth to retire takes time. Even so, but the concepts are not difficult as you imagine, as long as you can you can take more control over your finances. Reporting from MarketWatch, here are five principles that you can apply to get a prosperous life in retirement.

1. Make Financial Freedom Your Goal
Financial freedom isn’t something that just materializes. It’s like getting into shape. Most of us won’t lose weight or gain strength by refusing to change our habits and prioritize fitness and diet. It won’t happen. Life doesn’t work that way. Financial freedom, as with getting into shape, takes drive and dedication, and the first step is to make it our primary goal.

Once we set our minds to achieving a goal, human beings tend to implicitly begin to make decisions in support of that goal. We might go out to eat less and cut back on monthly subscriptions (like cable television). We might even keep our cellphones longer than just a year before upgrading them.

We’ll ask our employer or bank to automatically save a portion of our paycheck into a retirement account for us. In other words, it won’t be a mental struggle to save instead of spend when financial freedom is our number one priority. And we won’t miss the money because we know where it’s going: It’s building up into something powerful. Something that will enable us to achieve the freedom and liberty to design our own lives.

2. Invest in Appreciating Assets
While it’s true that nobody ever got rich by spending money, let’s take this one step further. Nobody ever got rich just by saving it, either. Saving money is better than spending it, but wealth is built by investing our money into appreciating assets. Examples include stock market, real estate (property or homes), businesses, to relics or historic objects.

The idea behind this is simple, we buy an asset (for example, a share of stock or a piece of property) for a certain price. Over time, the asset appreciates (or increases) in value. And then, we have something that’s worth more than what we paid for it.

Regardless of age, if you haven’t started investing in appreciating assets, start. When it comes to investing, late is better than never.

3. Automation
Here’s a clever trick to make sure you’re saving and investing every month, make it automatic. Just like a machine. Most of those companies will automatically make contributions straight from your paycheck into your investment accounts. Once it is set up, you’ll never have to worry about it again.

Automation helps to ensure those repeatable and dependable processes that need to happen every month happen. This is worthwhile to avoid late fees and interest. This is all due to setting up automated processes that guarantee that things happen when they need to happen.

4. Expert-level Knowledge of Cash Flow
Each month, money comes in and money goes out. For most of us, money comes in through our paychecks. It might also come from odd jobs we do for extra cash.

Money also goes out to pay our rent or mortgage, food, restaurant spending, cable television and our cellphone bill, and anything else we buy or spend money on during the month. That’s money out.

Together, a detailed understanding of your cash flow (money in vs. money out) means you know exactly what you’re spending money on and, ideally, how much money you have to spend. This is one of the most basic money principles of all.

Remember, look at your bills instead of throwing them aside, make sure you understand every line item on your bill! ‘Fun’ spending should come after paying your bills and funding your retirement accounts; be sure that you are aware of all of your subscriptions that cost money.

Small expenses add up fast such as morning coffees, lunches out, grabbing a bag of beef jerky, all add up. Remember, don’t cut out all your ‘fun’ expenses. Instead, it’s better to know exactly where your money is going. Only then can you make smart decisions about where to cut spending.

5. Eliminate Your Debt
Debts aren’t always bad. It’s true. If used properly, debts can better position us to make money over the long haul. For example, loans to build new businesses or improve our level of education can certainly benefit us beyond what we paid. However, many of us aren’t taking on debt that way. Instead, most people use debt as a means to spend money we don’t have.

Too many of us are spending money that we don’t have, and we aren’t necessarily using debt to improve our lives. When we are buried under mountains of debt, it’s almost impossible to build wealth because we are digging ourselves out of a hole.

Financial freedom doesn’t necessarily mean that you have no debt. Life isn’t that simple, and neither is financial freedom. Instead, it means that your debts haven’t put you into a position of weakness by spending money on things that depreciate in value and hurt your financial position.

Smart debts are those that improve our future and support our long-term goals. Smart debts are good debts. Don’t accept any other kind!

Top photo credit: pixabay.com/users/geralt

Isny Dewi R.
Isny Dewi R.
Journalist
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