Nigeria celebrates 58 years of independence next week. Sadly, we have not met our own expectations as a nation or attained the financial stability and security that we desire.
What does 58 mean to you? Are you 58 with little in the way of savings and investments? Can you see where 30 or more years of life can be funded? Will your children be willing and able to support the lifestyle you have grown accustomed to? Sadly, many people approaching the traditional retirement age cannot afford to retire.
There is no magic wand to wave and wish away the problem. Time is a fundamental part of successful investing and you have lost time. However, all is not lost; the good news is that there are concrete steps that you can take to help you along the journey to financial security. Here are some tips for late-starters:
Spend less than you earn
If you’ve been living a lifestyle dependent on that fat check that keeps coming in month after month, you will have to exercise the willpower to make the transition successfully.
Set aside the retirement calculator; it can make you despair as it shows you just how far behind you are. Instead, track your expenses to see where you are overspending and begin to cut back on things you don’t need. The real key to financial security is to spend less than you earn.
It may be that the numbers simply don’t add up. If you are physically able to keep working, then there is nothing wrong with doing so. The traditional retirement age of 55 or 60 is for many “retirees” the start of a new and fulfilling phase in a new career or business.
A few more years of earning well into your sixties and beyond can make a huge difference to your nest egg. It gives you time to accumulate and invest additional funds for retirement. If you aren’t able to work full time, a part time job or an at-home side business can help to stretch long-term finances. The ultimate aim should be to work because you want to, and not because you have to. There is another benefit; there is a study that found, that people who worked longer, lived longer!
Can you generate additional income?
Explore opportunities that can supplement your main income. What do you love to do that you are very good at? You have worked for decades; you have skills and talents, some that you have never used or leveraged on.
Perhaps you headed HR or accounts at a major conglomerate; you enjoyed world-class best practice training and have deep knowledge and experience. You should be able to use these skills on a consulting basis in your own time and on your own terms.
Have you thought of downsizing?
Must you still live in an expansive, expensive house even when all your children have left home, or can you let out some space?
Can you sell your large home and buy something smaller to free up cash? You may also release equity from your property, but remember that there is still interest to pay; if you default you could lose your home.
Can you relocate to an idyllic, calmer city that has lower living costs?
We have all accumulated far too much stuff. To extract extra cash consider selling some of your possessions that you don’t need and don’t ever use.
Be careful of consumer debt
If you are dependent on your credit card to buy consumables and regularly carry forward a balance, then you are only enriching the financial institutions and digging a hole in your nest egg. Plan to rid yourself of or at least reduce your high interest debt and free up your money to start to work for you.
Pay yourself first
Prioritize saving before you pay your bills; it is a powerful saving habit. Your pension cannot keep you in comfort so try to automate additional savings to grow your nest egg. Remember, though, that you cannot achieve much by just putting all your money in savings; it just won’t be enough.
Generate passive income
Give more focus to investing in assets that can appreciate in value and generate passive income. Property is one of the most dependable assets. When carefully selected and acquired with professional guidance, it is a great source of passive rental income.
The stock market has a good long-term track record, and many successful investors have built significant wealth earning regular income from dividends. Here is a word of caution about desperately trying to play catch up. Investing aggressively to earn higher gains may seem like a reasonable strategy, but be careful. At this stage you must protect yourself from the significant losses that the stock market inevitably suffers from time to time.
Don’t put all your eggs in one basket; focus on saving and investing in a diversified portfolio and maintaining a reasonable balance between growth and safety in your retirement portfolio.
Peer pressure exists even in your 50’s and beyond.
Even this far into life, there is peer pressure. You see your contemporaries living well in comfort and wealth and look at yourself wondering what went wrong. Don’t dwell on it; stay focused on your goals; you don’t know their story. If you try to keep up and over-extend yourself by living in a neighborhood that you cannot afford because you lived there when you were a company director, you will go broke.
Perhaps your company paid for First Class tickets for international travel for you. That was your company; this is you approaching retirement. You can still afford to go on holiday but don’t spend excessively unless you have built assets that can fund it.
In an intensely materialistic society like ours, many feel pressured to dip into their meager retirement funds just to keep up appearances. This is one of the surest and quickest ways to financial ruin. You cannot afford this in your later years.
Pay attention to your health
Healthcare is a very expensive part of life, and even more so as we age. Be conscious of taking care of your physical and mental health. Focus on preventive care measures including regular exercise, rest, a healthy diet and your annual medical check up to keep festering problems from becoming chronic. Don’t neglect your insurance; ideally this should have been in place for decades but there are plans available even if you are just starting.
Seek professional advice
Whilst you must ultimately take responsibility for your financial future, a financial advisor will review your specific situation, taking into account your risk tolerance, financial status, your goals and your family situation, and help you develop an appropriate plan.
As you go through life, there will inevitably be challenging times and you must be prepared to adjust your lifestyle and spending habits as appropriate to make up for the lost years of saving and investing. Lamenting the past, paralyses you and you don’t have any more time to waste. You may have close to a third of life to go so you do need to start taking action right away to achieve the financial security that you deserve.