Want financial planning for retirement? There are several steps you need to follow to be able to reach retirement with financial tranquility. We will introduce you to these steps that you can apply today!
You can even just start, without a concrete plan, but in the long run, the probability of having good results is minimal. Because when thinking about retirement, planning is not only relevant, but indispensable.
So, now see the Financial planning for retirement, put them into practice in your life immediately. That way, when it’s time to retire, you’ll have enough equity to no longer have to worry about money.
1. Assess your finances today
Knowing exactly where the financial situation you are in is the first step to planning. To do this, take stock, considering three essential aspects:
- Income and expenses: Record all of your sources of income and your fixed and variable costs. Thus, it identifies where your money is being spent and where you can save;
- Net worth: The difference between what you earn (assets) and your accounts (liabilities) determines your equity. The more positive you are, the better your financial health.
- Periodic review: Monitor your financial situation every year. This ensures that it is aligned with your goals.
In this way, you are completely clear about your financial health. Once you’ve finished reading your article, that’s the first thing you should do.
2. Set your retirement goal
Just investing without a goal will not bring a lasting result. To ensure a comfortable retirement, set a goal. Ask yourself:
1. When do you want to retire?
Establishing an age helps you calculate how much equity you will need to have to be able to retire with peace of mind.
2. What will be your ideal monthly income?
Understand the lifestyle you want to maintain. Your fixed expenses, leisure, and health care should be in the calculation to ensure financial stability.
3. How much do you need to accumulate?
This way, you have an idea of how much you will need, taking into account the previous answers. Stay tuned! Don’t forget to include inflation in the equation, as purchasing power decreases over time.
3. Research and study about investments
Knowledge! This is the key for those who want to retire or build a lasting wealth.
Investing is a way to achieve long-term financial stability, but investing without knowledge is a waste of time. For comparison, it would be like trying to drive without ever having even ridden a car. Therefore, studying different options should be a priority, especially when we think about financial planning for retirement.
Investing without knowledge can be risky. So, before investing your money, study, analyze the market and build a solid strategy!
4. Start investing as soon as possible
Time is one of the most important factors when it comes to investments. The sooner you start, the faster you gather the amount you need for retirement. Let’s look at some advantages of starting as soon as possible:
- Compound interest in your favor: the incidence of interest on interest helps those who start early. In this way, he sees in practice the positive snowball effect, where interest drastically increases his equity.
- Increased risk tolerance: Starting early, you can divide your money into multiple assets. Thus, in addition to increasing the chance of exploring any unexpected opportunities, it also protects your assets.
- More refined strategy: there is an “instinct” that only comes with years of experience. In fact, this is the biggest advantage, because over time you will understand more about investments and consequently you can invest better.
- He takes advantage of the most productive phase: in youth (between 18 and 35 years old) he has an energy that a person over this age does not have. So, take advantage of this phase to work hard and make more money, building your financial base.
In this way, he is building his assets. If you want to do it the right way, get to know the long term investment strategies.
5. Watch out for emotions (Financial planning for retirement)
Investing is not just a mathematical issue. Emotions directly influence decisions and ignoring this factor can lead you to bankruptcy. The market operates in bullish and bearish cycles, there are opportunities in both moments. However, to find them you must always remain calm.
When investments are going well, it’s natural to feel optimistic. However, this overconfidence leads you to impulsive decisions, believing that there are no risks because you are “too good”.
On the other hand, when you are down, that is, times when you are losing, it is normal to create an aversion to risk. Automatically this makes you harm your results.
In fact, emotions are the reason why a diversified and balanced portfolio is the best way in the long run, as it helps the investor to control his nerves, not moving by market variables.
The market always changes, but those who remain rational are the ones who manage to have the most results.
6. Prioritize your financial planning
Taking care of your own finances is one of the smartest decisions you can make. However, if you decide to do it manually (in the notebook), it can be a lot of work.
Therefore, we recommend that you use software like YNAB that will help you control your money quickly and practically. Another useful option is the financial management spreadsheets, where you just fill in the spreadsheet with your data and it already tells you how your finances are today.
Conclusion: Financial planning for retirement
By following all 6 steps of financial planning for retirement, you will be able to reach old age with money working for you. Thus, he will have his personal retirement, not depending on the government, or on anyone, because he built his wealth in his youth.
Start by assessing your financial situation, set your goal, and work towards achieving the objectives you have set. Don’t forget to study before you start investing to ensure that every effort you’re making really pays off.
Controlling your emotions is important, remember, you are looking for something that will bring results years from now and not immediate results. Finally, and most importantly, give priority to the plan you have made, do not exchange a life project for superficial things.
