A Lifetime Plan for Saving Money
When you are in your 20s, saving money is one of the distant planning that you seldom undertake. When you are in your 30s and 40s, then this becomes a minor concern. But mid 40s and early part of your 50s can make you anxious about your prospects of saving money for your future.
The world is not a perfect place so there is every chance that quite a lot of things might happen outside your plan. One of the simplistic but working idea is to save 10% of your life's earnings. If you have earned around 1.5 million dollars in your whole life, then the saving would be near about 1,50,000 dollars. That is a good amount to save for your retirement. You can then invest a part of the amount in stocks and insurance plans, which can give you further benefits in your life.
Personal finance and financial security is all about spending money wisely and of course not spending all the money at once. There are phases in life when you are having a bit of surplus and at times feeling the crunch. The chapters can be simplified into four times.
- The surplus of money at the time when you do not have any child.
- The deficit during upbringing and education of your children.
- After the child birth the income surplus.
- The money obtained at the time of retirement.
When you start your earning life, the expenses are low; you can cover all your expenses with the money you are getting. Moreover you are having surplus to spend. Use the money astutely, and put it into any investments or keep it as savings. People often make the mistake of thinking that the excess will go to added consumption.
This is one important period of your life; mistakes made here can prove decisive for your coming life. At least 50% of your disposable income should be kept in savings or in investments such as stocks. Put the 10% of your net income into savings for any large expenditure in future, and additional 5% -10% should be put into any taxable savings.
When children come into a family the expenses rise threefold. The bedroom needs to be sized up from 1 to 4 or else there will be not enough space for all of the members. So, the mortgage factor enters. There will be necessary additions like education, food, dresses, health and medicine, dental sittings, clubs and library, and camps. Going by the usual norms, the average cost of single child raising to his 18 is about $350,000.
There is a sudden expense drop when the child moves to college and he lives an independent life. This is the time to seek professional financial help. This is the period, which gives you another chance to save money. Professional advice can tell you exactly how much you need to save for your future retirement plans.
You need to possess adequate wealth and indulge in professional asset allocation and organization. You will have to understand and calculate what rate is safe for withdrawals. This will lead to income from various sources like savings, investments, pensions and benefits, which will cover those retirement expenses.
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