The majority of us (Tanzanians) have poor savings habit which affects our quality of life during our retirement.
Recent data shows that, as a society, we have a spending culture – Bank of Tanzania (BOT) recent data shows that our consumption rate is 62 per cent of GDP – as opposed to a savings one. The majority of us (Tanzanians) have poor savings habit which affects our quality of life during our retirement.
Most of us have conflicting priorities when it comes to affording our current lifestyle hence affecting our ability to save for our future/retirement.
We are not saving enough other than the mandatory savings (social security deduction) and this has to change. We need to develop a savings habit quickly.
But how much is enough to save for a comfortable retirement? A rule of thumb is that a retirement income equal to 75 per cent of your final salary just before you retire will allow you to live comfortably in retirement.
The best financial advice is always to start saving early on but that is easier said than done as life tends to pass by as we try to build our careers, start and support our families, and strive to overcome life’s challenges as they come. So how can you do that? This week I will share a few tips that will help you start your retirement savings no matter how overdue it may be:
• Set Clear Goals & Seek Advice – Before you can even think about starting to save for retirement, it is important to get a clear picture of what you want your life to be like after you retire. Thinking about where you want to live, what you will do with your time, and when you will retire will help you have clear goals. Once you have a clear picture of your goals, seek advice from professional financial advisors.
A research conducted by one of the largest mutual funds in the United States found that advised people can improve their retirement savings by up to 31 per cent compared to those who are not advised. This is because a financial advisor will work with you to determine how much you will need at retirement to live the way you want and will help you monitor your progress throughout.
• Choose Your Investments Carefully – There will be a variety of different retirement saving options based on your current financial situation and goals. For example, if you are starting your retirement savings late, you may need to consider investing more aggressively and vice versa.
These savings options have different terms, structures, interest rates, and requirements so it is imperative that you take your time to study the options before making any decision.
Because the wrong option here can have a significant impact on your retirement lifestyle hence the importance of carefully considering the options available cannot be underestimated.
• Look For Ways To Increase Your Income – A very important key to saving is to earn more than you spend.
Cutting down your expenses is a great way to find a little extra money to put towards your retirement, but there’s only so much room to cut back.
Once you’ve made some reasonable cuts, it’s time to focus on finding ways to increase your income.
There are different ways to increase your income; you can ask for a raise at work, or you can apply for a job that offers better benefits, you can take a second job (if your current job allows it), or you can look into starting a side business.
All the options I have mentioned here are to help you earns extra income so you can save more for your retirement so please prioritize your retirement savings when you get any additional income.
To summarize, I believe our failure to get into the habit of saving regularly is one of the biggest reasons why most of us don’t become financially secure.
If you don’t have it, then you need to develop a savings habit for your retirement by setting clear financial goals, choosing your investment options wisely, and seeking additional income.
Persistence and discipline is the key to saving, and hopefully, the tips I shared in this article give you a better understanding of how to save for your retirement.
