Sunday, November 15, 2009

Money Mangement As You Approach Retirement

A key element to successful money management is to live within our means. That is easier said than done in our culture of instant gratification. Fulfiling our basic needs is taken for granted and we desire luxurious comforts before we have saved enough money to afford them.

For those who are apporoaching retirement, it may seem that you have finally established yourself financially and deserve some indulgence. But your retirement needs (like medical cost, insurance, vacation, entertainment, etc) may have been underestimated and there are still outstanding debts to pay off.

Money Mangement As You Approach Retirement
To ensure a comfortable standard of living during retirement, mastering money management is essential.

Paying off the past

To live within your means, you need to implement responsible money management by paying past debts first. As an example, your children’s college bills are still outstanding. If you used PLUS loans (federally sponsored education loans for parents), you have standard, graudated, extended or consolidated repayment options to choose from.

You probably want to pay off the loans as soon as possible. It is better to live debt-free during retirement, as you no longer have employment income to offset expenses.

Avoid Credit Card Debts

It is of the utmost importance now, with retirement approaching, to avoid credit card debt. Whatever you purchase, make sure you can afford it and that it does not take away from your retirement savings.

Staying Smart and Rational

As you approach retirement, your kids will have finished their education, moved out and started their career, so they are financially independent. For the first time in many years, you may be responsible for just your spouse and yourself.

With this money freed up, you have more funds to meet your retirement needs. However, you need to stay smart and rational to prevent falling prey to get-rich scams, impulse buying, stock market exuberance, or other folly ventures.

Watch Expenses And Invest in the future

I believe most people should have accumulated a comfortable retirement nest in the few years prior to retirement.

It is easy to succumb to an extravagant lifestyle with surplus cash lying around, but spending recklessly now means you could outlive your retirement funds. That is not to say you can't indulge occasionally (like buying gifts, fine dining, or a vacation) during retirement if basic living expenses are well taken care of.

Investing in the future (on a conservative note) is also necessary, not so much for capital gain but to protect your purchasing power. The effects of Federal Reserve money printing will be felt keenly in the next few years, thus inflation is a threat to your wealth.


reyah said...

nice money tips.