Weight loss isn’t often used as an analogy for retirement planning, though success in both can come from keeping the steps you take simple, said the CEO and co-founder of Aspire Retire Olivia Maragna.
Sometimes overweight people don’t stick with fad diets, as they’re too complicated. In the same way, it’s hard to reach financial goals when the steps along the way are drastic.
“Young people are time poor,” Maragna told Business Insider, explaining that while the steps that can help you save are simple, they will make a big difference to your account balance in your golden years.
“It’s got to take the least amount of time possible. They are really easy concepts.”
“There are more important things to worry about than money when you’re young but doing a few simple things to achieve financial freedom at an early age will help you focus on having a great time throughout life.”
So here are five tips to help younger people plan for their retirement, care of Maragna, who was named the Australian Financial Adviser of The Year in 2012:
1. Managing cash flow
Life in your twenties and thirties should be fun. Your salary may be increasing which gives you financial freedom like never before and the skill of managing cash is vital – spend only what you can afford and set up a disciplined approach to your bank accounts and save a certain amount each pay day.
Pay yourself first (save first) and then only spend what is left over. For each pay rise you get, tuck it away and don’t be tempted to just keep increasing your living costs.
2. The good and bad debt
Clocking up bad debts may not seem important but a bad credit rating can be a serious problem later in life. It might be easy not to worry about tomorrow but this is one area where you will be the one who suffers. Concentrate on good debt, which is borrowing money to buy an investment, as opposed to bad debt which can be car loans or personal loans.
3. Super, super, super
You may have had many jobs – some casual, some short-term while you seek your ideal career.
This creates many superannuation funds. Whilst retirement may seem an impossibly long way away, getting super into one fund and investing for the long term will be a smart strategy.
Super is your money so take ownership of it and know where it is invested as it will likely be your biggest asset when it comes to retirement.
Consider doing a small amount of salary sacrifice to potentially save tax but also because you will need more than just the minimum to have a comfortable retirement.
4. Invest early
Investing doesn’t take much to start and you can now invest for as little as $100/month. Invest in an asset that will grow over the long term and increase your monthly contribution at each pay rise to rapidly enhance the investment.
5. Protect yourself
A regular income gives you financial freedom but what if you can’t work? Sick leave will cover you for a few weeks after which you will be dipping into savings or giving the credit card a work over to buy groceries.
How will you pay the expenses? Check that you have the right insurance to protect your strategy but also ensure you have a will and enduring power of attorney.
You may think you have no assets and no need for a will but keep in mind that your super fund may include life insurance so there might be money there that can be used to pay off debts and final expenses and enough left to distribute to beneficiaries.