Drawing up a road map to retirement
For someone struggling to make ends meet, it can be hard to look ahead and envisage a retirement completely free of money worries.
Here, though, is the rub. The longer you put off planning for those golden years, the more difficult it may become to live them out in a reasonable degree of comfort with enough money set aside for those extended holidays, leisurely games of golf or overseas family visits.
However, even if funds are tight right now, there is no need to write off these thoughts as mere flights of fancy. Instead, it is important to recognise that such goals are well within our reach, provided we plan carefully and take action early enough.
A sound strategy acts as a road map, showing not just the final destination, but also the best way to get there. And by implementing a clear strategy as early as possible in your working life, you can take full advantage of the effects of compounding.
In that way, your investments will grow by an increasing amount over a longer period of time.
The first step is to have a definite destination in mind. To establish this, the best place to start is by examining your lifestyle and financial goals, and calculating broadly how much you will need to enjoy the kind of retirement you have in mind.
You may want to spend part of the year at a second home overseas or to indulge a lifelong dream such as owning a sports car. Whatever the case, the next step is to set a figure against each of your goals. Then you will be able to see not simply where you want to go, but how much you need to get there.
If you take stock of your situation and project your income, spending and possible savings up until your preferred retirement age, you can create a basic balance sheet for the years ahead.
With that, you can calculate what - realistically - you are likely to have set aside when retirement rolls around.
Even if this is not as much as you hoped for, don't fret. Instead, look at the variables within your plan.
If necessary, you can consider changing some of your current spending priorities, eliminating the odd extravagance, or continuing to work for a few more years in order to accumulate more for retirement.
Another important way to reach your goals is to have an investment plan that makes the most of your wealth.
You can do this by investing in a diversified portfolio of equities, bonds, property and cash, which will give you the best chance of earning returns that allow you to reach your financial goals more easily.
Ultimately, the key to successful retirement planning is to have a clear financial road map. There may be ups and downs along the way, but this will ensure you never lose sight of your objectives and what it will take to achieve them.
Article contributed by Rainbow Pan, head of sales and operations of the fee-based advisory firm, ipac financial planning Hong Kong