Starting a saving habit early on in your life will help you prepare and fund future goals from starting a family to having a comfortable retirement. But what if you reach your 40s without setting aside much money?
What can you do now to start making up for the years you prioritized other expenses be it repaying your mortgage or student loans? Billionaire investor Warren Buffett’s advice might be able to help you with that.
Boosting Your Retirement Income
One important part of retirement planning is ensuring that you’re able to generate enough income to fund your lifestyle even without a job. Having a pension and retirement accounts might give you substantial spending money but they might not be enough to cover every expense you may have.
If you live in the United Kingdom, it’s advised that you supplement your State Pension by investing in a long-term portfolio via a Self-Invested Personal Pension (SIPP). Doing this now would give you time to build a substantial nest egg in time for your retirement in your 60s.
Investment Strategy
Speaking of investing, it’s also recommended that you diversify your money by getting into funds. Buying funds is considered to be a much safer investment compared to putting money in the stock market.
Funds offer you protection from the market’s frustration as it invests in a variety of companies in several sectors instead of just one. Those who have experience or knowledge of investing may buy shares of individual public companies and keep them in their SIPP.
From here, you can move on to try other investment vehicles such as government bonds, exchange-traded funds (ETFs), and even property. Just be sure to do the necessary research before putting your money in one.
The Power of Compound Investing
Growing your money through investing will take years but rest assured that you would be getting your initial investment and more in the future. Berkshire Hathaway CEO Warren Buffett himself knows the power of compound investing, which means that your investment grows faster as it accrues interest throughout the years.
Doing the numbers, you can end up with a retirement nest egg of $654,003 (£505,020) by the age of 60 when you start investing $647 (£500) a month for the next 20 years. This will be the case as long as you can be sure of enjoying an effective annual rate of 12.68%.
