Everyone dreams of retiring in their 30s with millions in the bank. The reality, however, is that most of us will be working well past retirement age and relying on our pensions. But it doesn’t have to be this way.
Business Insider spoke with two certified financial planners who explained how to best budget your life through each decade so you can retire in your 60s as a millionaire.
The key piece of advice is to make the most of your time in the workforce, so putting money away at an early age and continuing to do so as you get older is the first way to get ahead. Here are the other tips for each decade to help you live comfortably once you’ve left the workforce.
The 20s: Put 20% Of Your Income In A Compound Interest Account
Saving regularly is the first step to becoming a millionaire. I know it sounds like common knowledge, but when you’re in your 20s, you’re usually only worried about having enough cash for a weekend piss-up or being able to afford the latest Jordans. Saving in your 20s helps in the long run and creates good spending and budgeting habits.
The best way to do this is to deduct 20% of your wages and deposit them into a compound interest account as soon as you get paid. You’re less likely to notice the money being gone, and a compound account means you’ll be earning interest on your savings, helping build your financial worth.
The 30s: Live Below Your Means
When you hit your 30s, you’re more likely to earn a decent wage, meaning you’re prone to spending more. It’s just the way it is. There’s also a high chance you own your first home, are married, have a child, and possibly more. Being a parent isn’t cheap, and experts have discovered the only way to save efficiently is to live below your means.
That doesn’t mean you must start wearing hessian sacks for clothes, eating tuna and rice for every meal, or homeschooling children. Just be smart with your money. Make better mortgage choices, budget your weekly food shop, and don’t buy unnecessary products.
Do you really need a $150 Fred Perry shirt when you can get a similar-looking one from K-Mart for $30? You’re not in the prime courting decade of your 20s anymore. Think different.
The 40s: Focus on Growing Your Income
By the time you hit your 40s, you should be earning good money in your chosen profession, so it’s time to start focusing on your career and leaving the smaller details to others.
See an accountant and a financial planner to look after your money so you can dedicate your daily work life towards upskilling. The more you know, the more you are an asset to your employer. When that next performance review comes around, you can confidently ask for a little more money based on relevant skills and even secure a promotion.
The 1950s: Don’t Let Your Kids Take Over
Having been saving since your 20s and establishing a rather large nest egg, now is not the time to get sentimental. When parents are in their 50s, they often give their children large sums of money to buy their first car or help put a deposit on a house. While these are loving gestures, they also impact your ability to retire with enough money to live without fear.
The best way to help your kids while keeping your money is to teach them money skills so they can be financially independent. That way, they learn the value of money, and you can retire a millionaire. Oh yeah, make sure they’re living away from home by the time they hit their 20s. That’s if you want to save your cash.
Before making any financial decisions based on this article’s general advice, readers should talk to a financial professional for fun.