Personal Finance | Chill Maadi

Retiring without Worry

If you’re like most people, the recent market decline has done more than cause your investments to decrease substantially. It’s probably also caused you to rethink your retirement plans. After all, the only thing worse than retiring later than you planned is to retire and quickly run out of money.

But how can you ensure you’ll have sufficient funds to last your entire retirement? So many of the variables used to calculate how much you need for retirement seem uncertain. What is a reasonable rate of return for your investments over the long term? How long will you live, knowing life expectancies are increasing? How much can you count on from Social Security and pension plans? If you’re concerned about running out of money during retirement, then you need to be very conservative with your retirement assumptions. Some tips to consider include:

Assume your retirement expenses will be at least 100% of your current expenses.

Most rules of thumb indicate you need between 70% and 100%, but figure on 100% to be safe. Nowadays, retirees want to travel, pursue hobbies, and live an active lifestyle. That generally means you’ll need the higher end of these estimates.

Add a few years to your life expectancy.

You should probably plan on living until at least age 85 or 90. If your family has a history of longevity, add a few more years to these figures. While you may find it hard to believe you’ll live this long, you don’t want to reach age 75 or 80 and find out you’ve run out of money. At that point, you might not have the option of returning to work.

Reduce your estimates of Social Security benefits.

The Social Security Administration sends benefit statements every year around your birthday, telling you how much to expect in benefits. While the Social Security system is currently in sound financial condition, that is expected to change after all the baby boomers retire. To be safe, count on benefits that are somewhat less than the Social Security Administration is estimating and don’t plan on adjustments for inflation.

Cut back on your living expenses now.

This has a two-fold impact on your retirement. First, it frees up money to set aside for your retirement. Second, you get used to a lower standard of living, which should also reduce your expected lifestyle for retirement.

Reach retirement with no debts.

Mortgage and consumer debt payments consume a significant portion of most people’s income. Pay off all those debts by retirement and you significantly reduce your cost of living.

Forget about early retirement.

Saving enough to last from age 65 to 85 or 90 is daunting. Trying to retire at age 55 or 60 is just not practical for most individuals unless they’re willing to reduce their lifestyle significantly. Working a few more years can go a long way in helping fund your retirement. Those years are typically your highest earning years, so hopefully, you’ll save significant sums during that period. Also, every year you work is one year you don’t have to support yourself with your retirement savings.

Consider working during retirement.

Especially during the early years of retirement, you should consider working on at least a part-time basis. Even modest earnings can help significantly with retirement expenses.

Plan on making conservative withdrawals from your retirement assets.

Don’t plan on taking out more than 3% to 4% of your balance annually. With that level of withdrawal, your funds should last for decades.

7 Ways to Manage Good and Easy Personal Finances

If you want to be rich, you have to be able to manage your personal finances well! It turns out that it is not complicated to be able to manage finances independently! Follow the method below!

Happy reading!

How to Manage Good Personal Finance is Easy

Everyone certainly hopes to have a significant income, but did you know that the most important thing is that you can enjoy it, right? It’s unfortunate if we have a large salary or income, let’s say above INR 20 million, but our debts and bills are more than 70 percent of our income, and we can’t save or invest.

Any amount of income will not guarantee the welfare of our lives if we do not manage sound personal finances. Even rich people will be stressed and frustrated if they don’t manage their finances and manage their income and expenses.

Financial problems will certainly make your head dizzy, and you can’t sleep. So before financial problems pile up, it’s better to fix one by one simple thing and move on to the next stage. Let’s follow these Seven ways in managing finances that will make your financial life better, even avoiding the trap of consumptive debt.

#1 Have Personal Financial Records

Without personal financial records, we will not be able to manage personal finances properly.

Personal financial records are instrumental. This is an essential step we have to take. If we don’t do this initial step well, even consistently, then our finances will still be messy and not well organized. By recording personal finances, we can track where the money we earn is spent.

In addition, we can find out what expenses we can reduce, or we need to increase the nominal according to need. Recording personal finances can also help design financial goals; we can find our financial strength to achieve our financial goals within a specific period.

For example, suppose we have a financial goal to buy a house with a mortgage of 300 million in the next five years. In that case, we can plan from now on by saving a minimum down payment of 30 percent, which is 90 million for a specific time, according to our financial capabilities.

Besides buying a house, what other financial goals can we achieve? Of course, the first step we have to do is to record personal finances.

#2 Create a Monthly Budget

In creating a monthly personal finance budget, here is a formula that you can use 40-30-20-10, in the form of a division:

Allocate 40 percent of your income for daily expenses, such as monthly bill fees, to daily shopping needs.
Next, allocate 30 percent of your income to pay off debt installments if you have one.
You can allocate 20 percent of your following income for investment savings for a better financial future.
Then, 10 percent of your income you allocate to donations, gifts, or charity.

Easy, right?

#3 Manage Expenditures Wisely

This is where the art of managing personal finances comes in. Everyone certainly has their strategy, including you, right?

The first expense we need to pay is taxes or deductions.

Usually, this tax will automatically be deducted from the salary for workers or employees each month to receive a net wage that the cost of paying taxes has deducted.

In addition, deductions for social security for workers have also been paid automatically.

The next expense that needs to be regulated in managing personal finances is donations or charity.

Usually, 5 to 10 percent of the income is received.

Furthermore, to build good financial strength, we need to prioritize savings through investment vehicles.

Saving in the bank alone is not enough. The average amount of interest received in one year is not comparable to the current monthly administrative discount, which is quite large, especially with the inflation rate increasing every year.

Therefore, it is highly recommended to invest through various investment instruments that are very profitable to build a personal finance printer and prepare for a better financial future.

From this investment savings, we can also increase our income by building a business from the investment income.

Thus, we will increase the financial income stream.

#4 Create an Emergency Fund from Investment Savings

An emergency fund is a significant fund to anticipate an emergency or urgent situation not to affect our financial condition.

There are many events or disasters that we cannot predict, so we need to have an emergency fund.

So, where can we collect emergency funds from? Did you know that we can collect emergency funds from investment savings funds?

Already know the number of emergency funds you have to prepare?

Usually, you need to collect six times the total expenditure per month for single or unmarried couples.
In contrast to those who are married but do not have dependent children. Ideally, they need to raise an emergency fund of 9 times their total monthly expenses.
Meanwhile, families with dependent children need to collect an emergency fund of 12 times their total monthly expenses .

#5 Have Health & Life Insurance

There are still many people who do not understand the usefulness and importance of having insurance.

They feel a loss because they have paid for insurance so far but have never received the benefits.

The question is: does anyone want to get sick or experience bad things? Insurance is used as an umbrella to protect us from rain or the scorching heat.

We don’t know when the rain will come, but we need to be prepared and on guard, correct?

Herein lies the importance of health and life insurance where we need to have it!

There are many benefits of having insurance, including:

The insurance premiums we pay can pay for treatment or care.
The insurance premiums we pay can protect assets and prevent loss of assets and debt.
The insurance premiums we pay can replace installment payments and debts
Increase funds for family needs.
Can focus on healing

#6 Pay Debt or Installment

If you have debts or installments, prioritize them first to pay them off one by one.

To get accurate advice and solutions to get out of debt that binds you and makes it difficult for you to sleep, immediately contacts my Financial Planning Consultant that you can rely on!

Did you know that hiring the services of a financial planner or financial consultant is very expensive?

But, no need to drain your wallet just by subscribing to the Financial Application for one year at a subscription price of Rp. 350 thousand/year, you can consult with a Certified Financial Consultant and get the right solution on managing personal finances and how to get rid of confusing debts.

#7 Avoid Consumptive Debt

Consumer debt will make your wallet tighter. However, financial planners and financial experts agree that consumer debt is not recommended.

On the other hand, productive debt can increase your income; for example, you borrow some money for business capital from the bank or make a vehicle loan where the vehicle is used to work or make money.

Managing Personal Finance is Easy & Fun

It turns out that managing personal finances is fun and not complicated, right!

Keeping track of personal finances is not complicated, you know! We can be assisted with financial recording application services and apps, many of which are free.

These apps make it easier for us to record daily finances. Not only taking notes, but this application can also help calculate the costs that must be collected per month to achieve a financial goal.

We can also consult with a Certified Financial Planner. So don’t forget to immediately record expenses and income transactions that occur at the same time, so you don’t forget to register or miss them.

Getting Your Portfolio Back on Track

The recent market declines have been steeper and of longer duration than many expected, making it difficult to determine how to adjust your portfolio.

Should you leave it alone, hoping the market will quickly rebound to much higher levels? Or should you sell everything and put your money in cash accounts?

The appropriate answer probably lies somewhere between those two extremes. What you should do is thoroughly review your portfolio. Consider these tips when analyzing your portfolio:

Take another look at your financial goals.

Now it’s time to face reality. If your portfolio declined substantially in the past three years, it would probably affect your financial goals. Recalculate how much you need to save on an annual basis, based on your investments’ current value and a reasonable future rate of return.

Be prepared to readjust your goals. For many people, one of the most painful results of the market declines has been the realization that they are now going to have to delay retirement.

Set an asset allocation strategy for the long term.

The most basic investment decision you’ll make is how to allocate your portfolio among the various investment categories, such as cash, bonds, and stocks. You want to ensure your portfolio is diversified among various investments, so when one category is declining, other categories will be increasing or not decreasing as much. To decide how to allocate your portfolio, you’ll first need to come to terms with your risk tolerance.

Factors like your time horizon for investing and return expectations will also impact your decision. Once you’ve decided on an asset allocation strategy, you’ll need to adjust your current portfolio to get it in line with that allocation.

Thoroughly review each investment in your portfolio and decide whether you should continue to own it.

Some stocks will rebound from the recent market declines, while others may never rebound. If you think an investment won’t rebound or will take a long time to do so, you may want to sell it and reinvest in others with better prospects. It’s a painful thing to do since most investors have an aversion to selling at a loss. But it’s an important step to ensure your portfolio is on track going forward.

Also, make sure your remaining investments are all adding diversification benefits to your portfolio. Just because you own a number of investments doesn’t mean you are properly diversified. Often, investors keep purchasing investments similar in nature. That doesn’t add much in the way of diversification and makes the portfolio difficult to monitor.

Look for investments you’ll be comfortable owning for the long term.

It’s tempting to look for the biggest winners in investments and put your money there. In essence, however, you are chasing yesterday’s winners rather than tomorrow’s winners.

You need to keep in mind that the best-performing investment category will change from year to year. A better strategy may be to select a diversified portfolio of investments you’ll be comfortable owning for the long term, so you have some money invested in each of the major investment categories.

Use dollar cost averaging to invest.

If you’ve been investing throughout the market declines, you have probably been purchasing at lower and lower prices, making you wonder whether it makes sense to keep putting money in the market. The point of dollar cost averaging is to invest a set amount of money in a certain investment on a periodic basis. When prices are lower, you will purchase more shares than when prices are higher, following half of the investing principle of “buy low and sell high.”

But the most important part of dollar cost averaging is that it forces you to continue investing when you really don’t want to invest. In the long run, when and if the stock market rebounds, you will probably be glad you had the discipline to continue investing during this market downturn. (Keep in mind that dollar-cost averaging does not guarantee a profit or protect against losses.

Because it involves continuous investment regardless of fluctuating price levels, you should consider your ability to continue investing through periods of low price levels.)

Pay attention to taxes.

Taxes are probably your portfolio’s largest expense. Ordinary income taxes on short-term capital gains, interest, and dividends can go as high as 38.6%, while long-term capital gains are taxed at rates not exceeding 20% (10% if you are in the 15% tax bracket). Using strategies that defer income for as long as possible can make a substantial difference in the ultimate size of your portfolio.

Some strategies to consider include utilizing tax-deferred investment vehicles (such as 401(k) plans and individual retirement accounts), minimizing portfolio turnover, selling investments with losses to offset gains, and placing assets generating ordinary income or that you want to trade frequently in your tax-deferred accounts.

Review your portfolio at least annually.

You can’t just adjust your portfolio now and leave it on autopilot. You need to keep an eye on your portfolio in case market, or company situations require changes. By reviewing your portfolio annually, you’ll have an opportunity to make adjustments on an ongoing basis, which should prevent major overhauls in the future.