Building a healthy safety cushion come retirement may be easy in theory, but creating wealth doesn't have to be rocket science either. By following the right principles and having the right mindset and habits, saving up for retirement can become easier.
The equation for money success
Financial success can be a result of having a solid understanding of how much money to invest, its growth rate, and the time it needs to grow. But more importantly, one’s chances for living the best possible lifestyle has everything to do with taking the necessary action.While there are many helpful resources to help individuals save, nothing can be more valuable than the expertise and experience of a professional financial planner. Financial literacy is important and as the recent data from the Household, Income and Labour Dynamics in Australia Survey, known as HILDA, showed, an individual's attitude towards finance is influenced by financial literacy.Among the findings was the realisation that those with low financial literacy are less likely to save regularly--making them likely to experience financial stress in the future. As a whole, the results suggest that there's still a lot to be done to improve financial literacy across genders, generations and income groups.
What does this mean?
Knowledge of one's financial literacy may help influence an individual's money habits, like saving for retirement. Such awareness can be advantageous in devising an effective retirement plan.Having a plan can be helpful in ensuring an individual saves more than spend, which seems to not be the case for many Australian households in 2018, when findings from a report showed that a quarter of households have less than $1,000 saved in the bank.Almost 45 per cent of the respondents said they were in mortgage stress, meaning more than 30 per cent of their income goes to mortgage. On the other hand, there was a decrease in the number of tenants who spend 30 per cent of their income on rent--67 per cent from 72 per cent from the previous six months.This kind of financial situation could make it difficult for households to recover from even the smallest personal change, like job loss.The good news is, anyone can turn things around and create wealth just like this inspiring story of a man who managed to make more than $1 after finding himself at a low point.Sabatier's financial success story isn't unattainable. With the right financial mindset and taking action, anyone can generate enough savings, boost super, and retire comfortably in to live a rewarding life.These science-backed money-saving tips might help:
Change the perception of time
The impact of one's perception of time has a significant influence on one's financial health, as shown in a 2014 survey by renowned psychologist Philip Zimbardo. It found that individuals who tap into their negative past memories are more likely to experience positive financial health as compared to optimists.Those who base their decisions on the not-so-positive aspects of their lives are more likely to avoid repeating those experiences and save more for the future. People who are focused on the present are the worse kind, according to the study, because they act on impulse and don't consider the future.
Make automatic deposits for savings
Behavioural economists have found that making saving easier and spending more difficult is key. Shlomo Benartzi, behavioural economist, wrote that people probably won't save if they have to actively think about it. This supports why automated deposits are among the most effective way to save for retirement.A 2005 study showed that workers have more success in saving for retirement if they are enrolled in a company plan instead of being given the option to contribute to their fund.On top of the automatic contributions made by employers, employees can arrange for salary sacrificing--directing a portion of the pre-tax income to a super fund--so one doesn't have to actively think about it.
Negative consequences can be a great motivator
Set actionable plans that have negative consequences. According to Dean Karlan, economics professor at Yale University, the lack of motivation is one of the major reasons people fail to save and that having an economic penalty for not saving actually helps achieve an individual's savings goal.This might be challenging, especially if one’s doing this on his own and because there's not much online tools or apps to make you accountable. However, seeking help from friends or like-minded individuals can make it achievable for anyone.It’s all about the mindset. Having a shift in perspective may be the jumpstart one needs to save more and boost the retirement fund.Working alongside a Strategic Wealth Planner will help you make the most out of your super contributions.
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