Once you start earning an income, responsibilities and mandatory expenses begin to pop up from all angles. From paying of utility bills and school fees, to tax and even house rents, a major part of your salary or business profits doesn’t stay in your bank account. If you’re working for an employer of labour, you would have an idea of what it takes to make ends meet in the present situation of Nigerian economy – where the prices of basic goods and services have reached skyrocket rates. You may be wondering, if the situation is this way, how will you survive in the future after retirement? There’s only one answer to that – SAVE!
It’s not easy saving when you depend on a salary to enable you pay bills and meet up with your daily obligations. This has made it difficult for most people to figure out what to do when they retire. Keep in mind that, in your 60s and can no longer work, you can only enjoy the “good life” if you have money saved up, got some inheritance piled up or win a lottery. But if you don’t want depend on luck, here’s how to save for retirement.
Your Retirement Planning should Start Early
Like they say “the earlier the better”. It’s best to start saving as early as possible. Your 20s is a perfect start. There’s a general law that says every income earner should try and save as little as 20% of their earnings. For example, if you make £1,000 a month at the age of 25 and you’re able to save £200 from it. By the the time you turn 65, you would have saved about £380,000. Its likely to be more as your income increases over time. You must not save a specific amount, it’s best done in percentage – which helps you plan better. This is because if you decide to save £200 monthly from £400 income, you will struggle to make ends meet at the end of the day.
You will be doing yourself and your future a whole lot of good if you can utilise compound interest. The little amount you save today will become valuable tomorrow. As your financial situation improves with time, your lifestyle is also likely to undergo some changes as well. But instead of taking advantage of a pay rise to start living extravagantly, you can boost your savings – and you would never regret you did.
Have a Weekly or Monthly Budget – and Stick to it
Having a retirement savings as a Nigerian goes a long way in determining how your future would look like when you can no longer work to earn an income. If you’re only managing to make ends meet with your weekly or monthly earnings, it might be difficult making a budget. But no matter how much you earn. You need to have a full knowledge of where your money goes and needs to go within a given period of time. It helps you save better and make the right financial related decisions.
There are different ways to come up with a weekly or monthly budget. List down all your sources of income. Then write out all the fixed expenses. From mortgage, rent and utility bills to car payments, and even debts, ensure that none is left out. Then put down the variable expenses – clothing, food, entertainment and so on. Finally, include how much you are saving from the income. This makes it become a priority like the others. When you have e calculated them all, check if what you earn is more than what you spend. If it is, then you are getting things right. If it’s the other way round, then you need to fix up your budget. Even when you are spending exactly what you earn, something has got to be wrong. Decide on what to cut down on and frivolities that you can absolutely do without.
Furthermore, endeavour to update your budget from time to time. If you lose your job adjust the budget to fit into your current financial situation. \
Have a Retirement Savings Account and Set it up for Automated Deposits
Having a regular savings account for your daily use and a retirement savings account are two different things. When an account is tagged as a retirement account, you wouldn’t be easily tempted to touch the funds in it. You can also set up automated deposits so that whenever you receive your salary or monthly income, a specific amount of money is deducted and deposited straight into the account. This way, you are sure not to forget a scheduled payment. If you have the account with a Nigerian bank that has specific rules guiding the operation of such account, you won’t be allowed access to it until when due. This helps you save a substantial amount for retirement.
Look for ways to Generate More Income
You might be wondering how to generate more income for your retirement savings, given that it probably took you some time to even find the current lucrative job you’re doing at the moment. Perhaps, you didn’t have the capital to run that small retail store, launch that digital marketing site or start planting on that farm – now you do. They important plan here is to earn more than you spend.
If you feel you’re not business savvy, or you don’t want to invest capital into your own business, you can buy stocks or put in money into a promising start up company. You can also request for a salary increase at work if you have been there for a while and you know how valuable your skills and input are to the organization. Alternatively, you can take up a second job. Or freelance – if you have enough time after work and you can juggle both jobs.
If you love to write, start writing. Register on freelance platforms. If you can sing, take up a live band job at the local pub. When you make money from what you love doing, it makes it easy for you to handle more than one task. You also need to learn how to save unexpected income. There could be a bonus for being staff of the month. Or a tax refund or even money won from gaming – take it straight to your retirement savings account. Many people are quick to squander monies from such windfalls. It could be tempting but it’s really not worth it. It will likely benefit you more in future when you have a plan. With the right planing, your retirement savings would be your source of income afterwards.