Retirement Dreams on a Shoestring Budget: Mission Impossible?
That’s a tough question to answer especially if you’re living paycheck to paycheck. Financial freedom is not something that you can achieve overnight. However, the good news is you can – once you master the art of saving, investing and managing debt.
The first order of business is setting your mindset: That no matter what happens, you will go through the process of improving your financial situation. Recall the dedication it took to earn your first degree. Now, you can channel that same drive to secure your financial future.
Let us begin. While these tips will not 100% guarantee you will have enough money for a quality retirement, however, with enough discipline they will help you conquer small financial milestones.
1. Cut up your budget pie
- How much is your entire pie? This consists of all the money you receive in your bank account each month i.e. monthly income and side salaries.
From the entire pie (100%), you will then cut it into three categories according to our recommended 60/20/20 budgeting rule:
- Daily expenses (60%) e.g. food, transportation, bill payments, subscriptions, etc
- Emergency savings (20%): Saving for home repairs, car fix, medical needs, etc
- Savings & Investments (20%): Retirement accounts, emergency fund, small investments
2. Delaying gratification
It turns out that saying 'no' to splurges now is like sending a gift basket to your future self. Who knew denying present-day pleasure could make retired you so happy?
Remember: Whenever you resist an impulse buy, you're high fiving your future self on a beach somewhere. So, next time that shiny new gadget tempts you ask yourself: 'Would I rather have this now or a better retirement story later?'
Delay the small stuff and watch your retirement dreams grow more significant than that coffee cup you didn't buy.
3. Build your passive income
- Leverage your skills online with freelancing (by offering your skills), online courses (create and sell courses to online learning platforms like Udemy or Coursera), or even blogging.
- Discover your passions and talents and turn them into a profitable side hustle. Whether it's selling products online, dropshipping, or renting out unused assets, the possibilities are endless.
- Become an online entrepreneur by creating e-books about the subjects you are an expert in, designing beautiful templates that your customers can use for their projects, or even taking beautiful photographs and selling them to stock image websites.
4. Choose your hours (and friends) wisely
- Productive Hours: Swap Netflix binges for skill-building. That side hustle won't start itself!
- Money-Savvy Squad: Hang with friends who prefer potlucks to pricey nights out. Your bank account will thank you.
- Learning vs. Lounging: Trade gossip sessions for financial podcasts. Knowledge compounds like interest.
- Influential Connections: Network with success-minded folks. They might just be your bridge to better opportunities.
- Values Alignment: Surround yourself with people who get your financial goals. No more peer pressure purchases!
5. Maximize your EPF savings by contributing regularly and refraining from withdrawals
EPF allows you to make voluntary contributions up to RM100,000 per year so this can definitely help you grow your future wealth further. With EPF's historically competitive dividends, your money doesn't just grow – it multiplies. Take advantage of compound interest.
6. Complement your mandatory savings with Private Retirement Schemes (PRS)
At Principal, we offer the Principal PRS End-to-End Retirement Solution, a comprehensive retirement plan that starts with the accumulation phase and upon maturity, automatically transitions your funds into the decumulation phase.
Phase 1: Accumulation phase
- Goal: Accumulate and grow your wealth for retirement
- Solution: PRS accumulation solution, that may help accumulate and grow wealth by investing in a Target Date Fund (TDF); a fund that will adjust its portfolio risk and return automatically to suit the investor as they age towards retirement.
Phase 2: Decumulation Phase
- Goal: Create a passive income stream sufficient to cover daily living costs and maintain a desired lifestyle in retirement.
- Solution: PRS decumulation solution, a post-retirement solution for withdrawal planning while achieving continuous and sustainable growth.
Good news: With PRS, you can enjoy tax relief of up to RM3,000 annually, because PRS contributions are tax deductible up to an amount set by the Ministry of Finance*
*Subject to government directive
What to do next?
Don't let uncertainty hold you back. Reach out to us to begin your retirement savings journey: https://www.principal.com.my/en/principal-prs-end-to-end-retirement-solution
Disclaimer: Investing involves risk and cost. You should read the relevant Prospectus, and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) before iInvesting. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary. Securities Commission Malaysia does not review advertisements produced by Principal. For full disclaimer, please visit bit.ly/Principal-PRS-Disclaimer