How to Plan For the Future
Retirement, no matter how far away it is, always creeps up on you, and before you know it, its upon you. Regardless of whether you have just started your career, or have been working for over 25 years, it is important that you start saving up for retirement, as you won't have a monthly income to support yourself.
Common sense says that the early you star saving for your retirement, the more you will have saved up when that time rolls along, not only because you will be saving more money over time, but because if you have your retirement plan in a high yield investment, like a 401(K) for instance, you will be gaining interest on your money every year. Think of it like this: you start with $100 in a shoebox in the top of your closet, and every year you deposit another $100 into the shoebox for ten years; you have saved $1000. Now take that same $100 a year and put it in a high yield bank fund offer 10% return on your money. Now after ten years, instead of only saving $1000, you have saved almost $2000. That is a 200% return on your money in the long run.
Obviously the most important part of saving for the future is saving. A good philosophy to live by is "pay yourself first." This means that as soon as you receive your income cheque, before paying the bills, the mortgage, or any of your other expenses, you set aside a certain amount for your savings. It doesn't matter if you are saving only $100 per month or $1,000 per month. A good way to gauge the amount you should be saving is it should be about 10 percent of your monthly income. For example, if you are making $1,500 a month, you should put aside $150 for your retirement. This may not seem like a lot, but take a closer look. $150 a month for one year is $1800 saving per year. If you work for 20 years, that is $36,000. However, this doesn't take into account interest, which will accumulate your savings of $150 a month to almost $200,000.
Though most companies offer pensions to their employees, it is not a good practice to rely solely on a pension after you retire. Many companies have changed their policy regarding pensions, and the amount employees get for their pension has been reduced. It is good to take advantage of your company's 401(K) plan. You can use a percentage of your income to invest in stock, money markets, stock, or mutual funds. The advantage of the 401(K) is that it is not taxed until you withdraw your money from it, meaning you have more money to earn interest.