Picture yourself in retirement but consider this: retirement could span up to 30-40 years, given the continual rise in life expectancy with some of us reaching the blessed age of 88 or 99! With this in mind, as you prepare to retire, you're diligently striving to maximize your earnings, knowing that time is of the essence. Amelia Hong emphasizes additional strategies to not just to rely on your income, but to bolster your financial resilience for the long journey ahead.
Savings add up
Building a savings habit is crucial, regardless of your income. Start small, even with just 5%, and gradually increase over time. Every ringgit saved counts, and even small adjustments in spending can make a significant difference. Commit to consistent saving, especially in your early earning years. The power of compound interest and time will work wonders for your financial future. Money which makes money, makes more money is a motto Amelia believes as she sees people became financially empowered in the course of her work.
Starting to save early can significantly impact your long-term financial goals. Consider this example: consistently investing RM1,000 monthly with an 8% annual return from age 30 to 60 can accumulate a substantial sum of almost RM1.4 million by retirement. However, delaying this saving by 10 years would require 2.5X your monthly contribution to RM2,500 to achieve the same target. Delaying it for 20 years till you are 50, means you need to start investing RM8,000 per month. That is 8X more than when you were 30. If you think that RM1,000 per month is hard now, RM8,000 is almost impossible.
Spending with thought
Understand the distinction between desires and necessities.
Continuously question yourself: "Do I really need this?"
Opting out of purchasing a luxury car today could translate to an additional half a million in savings two decades down the line. Additionally, consider the true expenses associated with ownership, as maintenance costs which can significantly inflate the overall expenditure. This is called the true cost of ownership of things. Cars and Houses or even pets are big ticket items that comes with quite a hefty additional expenses to maintain them. Be aware of the true cost of ownership.
Stay away from bad debt
With an interest rate of 18% per annum, credit card debt will swiftly double its size in 4 years! Should you choose to pay only the minimum, clearing a RM40,000 debt will stretch over a daunting 10 years and 7 months, accompanied by a staggering RM16,912 in interest payments. Consider the possibilities if you redirected these funds—perhaps towards a dream vacation, a down payment on a new vehicle, startup capital for your business aspirations, or a boost to your retirement savings.
Will you emerge victorious in the financial race? Strengthen your financial fortitude with three straightforward habits.
Ready, set, go!
