How to plan for retirement when money is tight? Here’s how!
It is accurate to say that almost everyone flinches when they hear the words retirement planning and more so for those with minimal earnings. However, the reality is that everyone needs to plan for their retirement, whether they earn a lot of money or whether they make minimum wage.
The fact of the matter is that at some point in life you will retire from that job that you depend on so much. It is thus important to make sure that you are well prepared to live a decent life after retirement even if you have a tight retirement budget. You might want to consider the following tips if you are looking to make a retirement plan with a small budget.
Consider moving to a cheaper location
According to statistics, most people receive roughly $1,000 every month after they retire. This amount may not seem like much based on your expenses and the lifestyle you are used to. However, it is just a matter of perception. The monthly amount may be a lot if you shift to a location that is more affordable. For example, $1,000 is not enough to cover rent for a two-bedroom apartment in New York let alone other essentials such as food. However, the same amount could cover rent for example in a third-world country even in a good location and still be enough for all other bills and you would still have some extra cash to spare.
It is thus a good idea to consider moving to a location that is less expensive where you will be able to optimize your pension and still have quite a good life.
Cut down on expensive escapades
Planning for retirement with a small budget obviously means that you will have to limit your spending habits. At this point, it is obviously a good idea to avoid trying to keep up with peers even if it will be a blow to your peers. After all, this is your future that you are thinking about. You should also be very cautious about where your money is going and thus be able to account for it. Consider optimizing your retirement funds by saving some of the cash that would have otherwise be spent carelessly.
Make sure your budget account for everything including your recreational activities
Having a tight budget does not mean that one should exclude fun activities from the budget. After all, one has to make sure that life is still interesting. Planning for retirement with a limited budget means that you cannot spend without having budgeted for that specific item, service or activity. If you want to do something fun, then do it but just make sure it is budgeted for and that it does not take a huge bite off your limited funds.
Prioritize your essentials before anything else
Having a tight budget for your retirement unfortunately means that you do cannot spoil yourself as much as you would like. Since your finances are rather tight, it would be wise to consider prioritizing the things that are a necessity in your life, such as food, and housing. Essentials should be considered first before anything else. After that you can start thinking of other things but only as long as they fall within the budget.
In this case, it is a good idea to create a daily, monthly and weekly budget to make sure that everything is optimized. This will allow you to monitor your finances with more discipline which in this key to making sure you do not deviate. Healthcare will most likely be one of the biggest expenses. It is thus important to consider it while planning for retirement by saving some extra cash that can cover health costs.
Steer clear of debt
Anyone planning for retirement should definitely avoid debt. All the more reason to avoid it especially if you are making retirement plans on a tight budget because debt can eat into your savings. The result of this would be a significant reduction in the savings which are already limited, thus leading to an even stricter budget. It is important to make sure that you are debt-free by the time you retire because this will ease your financial burden
Consider an extra source of income even after retiring
Having a small business is also a great idea to boost your retirement income. The beauty of this is that you can still continue to run the business even during your retirement years and this will supplement the retirement savings. This will, in turn, allow you to do more with your revenue or perhaps help you cover some of the deficits in your limited budget. In short, having an extra source of revenue other than your retirement savings will go a long way towards serving your financial needs.
Sell some of your properties or assets
If you are planning your retirement on a tight budget, then chances are that you are looking to optimize that even with the slight margin. You might, therefore, consider selling some of your personal belongings or property such as a vehicle and other items that are valuable. For example, you could sell your car and take advantage of public transport. You could also sell your house and move into a new home that is smaller, cheaper to maintain and located in a town with a less demanding lifestyle. Regardless of the limited budget, it is always important to remember that it is never too late to plan for retirement and that it is possible even with a strict budget.