Starting on a Path to Financial Security

Waiting until a few years before you retire to save money and secure your financial future is a recipe for disaster. You never know when you will get sick, deal with emergency expenses or get into debt because of an unforeseen circumstance.

There are different ways to reach financial security; it’s all a matter of implementing and looking at the big picture.

Start as Soon as You Can
It’s never too late to start saving and planning your financial security, but it’s better if you start as soon as possible.

There is a huge difference between someone who saved $150 every month for the last 30 years, compared to someone who saved the same amount for 10 years before retirement. Saving for a short time goes a long way in covering some of your expenses, planned or unexpected, during your retirement years.

Other aspects of financial planning, such as asset allocation become increasingly important, as you get older. Your risk tolerance decreases as the years in which you can recover losses goes down.

Diversify Your Portfolio
The old saying that you shouldn’t put all your eggs in one basket holds true once you inch closer to retirement. Putting all the money you saved over your life in one form of investment increases the risk of losing everything, if that investment fails. This is where asset allocation becomes important.

Proper asset allocation considers different factors such as:

1. Risk tolerance as this makes sure in the event of any losses, they take place at a time when it is still possible for you to recover them.
2. Your age also plays a factor in asset allocation. The younger you are, the more aggressive your portfolio manager will be and less so once you get older.
3. Whether your assets need to generate income or grow.

Consider Savings as an Expense
Saving regularly is difficult as you have regular expenses to deal with and the tempting consumer goods and travel that will consume your disposable income. You can safeguard your retirement fund when you treat them as expenses that you will regularly incur.

You can have your retirement savings deducted from your salary by your employer or directly debited from your account to a retirement savings account as soon as it is credited.

Achieving financial security may seem difficult, but if you plan and take decisive action it is doable even before you reach retirement age.