Saving For Retirement: How To Save On A Tight Budget

Saving for retirement can sometimes feel overwhelming, but it needn’t be. Our experts offers a few tips anyone can use to save for their golden years, even when money is tight!

Sixty-six percent of women in Asia are worried about not having enough money for their retirement. Even though saving for the future can seem daunting, we can’t ignore the inevitable. That’s why we’ve teamed up with Saijal Patel, founder and CEO of Saij Elle, an education and consultancy platform to help women build financial wellness.

Did you know that women are 80% more likely than men to live in poverty during retirement? Often, women make less income than men and, because they also typically take several years off work to raise their family or take care of elderly parents, they save less and are entitled to fewer pension benefits. However, women also, on average, live five years longer than their male counterparts. That means they have to make their fewer dollars stretch further.

We women can’t fix the gender inequality overnight but we can be wiser with our money to ensure our future is secure. Every women deserves a happy, healthy and fulfiled retirement. By taking the right steps, you can get there.

Do you find saving for your retirement daunting? Certainly if you live in Hong Kong, which was recently crowned the most expensive city in the world, it’s understandable that many of you will find it a tough balancing act managing today’s bills (rent, groceries, children’s sports activities and school fees, etc.) and saving for a future retirement that may be 10, 20 or even 30 years away.

But here’s what I do know: You will have to live off whatever savings you have accumulated at the time of retirement for at least 20-30 years. When you’re well into retirement and think you may run out of funds, it could be difficult if not impossible to work, or to find other means to make up for the shortfall. This is why retirement takes planning. Sorry ladies, there’s no way around this one!

Here’s what else I know: With a system in hand and a little bit of discipline, planning for your retirement can be straightforward and stress-free. Below are a few proven strategies on how to save for your retirement – even when money is tight!

Make Budgeting Your Friend

First things first. You can’t save money for your retirement if you don’t have financial control right now. To get a handle on your finances, you should know where all your household money is coming from and where all of it’s going.

So create a budget. Even if you hate it (like I do), do it for three months and review it against your actual expenses at the end of each month. I can guarantee you that a light will switch on, and you’ll find areas where you’re unnecessarily spending and where you’re better of putting money towards. After all, you can’t fix what you can’t see!

Pay Yourself First

Ready to learn a best-kept secret? Most people will spend money and only save what’s left (if there’s anything left) towards their retirement. They have it all wrong.

By setting aside funds towards retirement first before you spend the rest, you’ll ensure you’ll reach your goals. How do you do that? Treat retirement savings as an expense and allocate funds towards it. A good rule of thumb is you want to be putting away 10% to 20% of your monthly income towards it. Ten to 15% if you’re in your early thirties, and 20% if you’re older and haven’t started saving.

Secondly, automatic your savings by having a percentage of your pay sent directly into a different savings account that you won’t touch.

When it’s out of sight, it’s out of mind. Think it’s tough? Look at it this way: If tomorrow, your employer told you that you had to take a 10% to 20% pay cut you’d complain, but then you’d adjust your lifestyle accordingly. Humans are very adaptable, even when it comes to our life choices.

Invest Your Savings

One of the most effective ways to build wealth for your retirement is using your money to make money all the time: while you sleep, go on vacation, or just enjoy time with family. Doesn’t that sound great?

You can do this by creating a well-diversified investment portfolio that’s in line with your risk tolerance. Investing can help you generate a decent return that helps you get ahead of the rising cost of living. And the best part? You will take advantage of the power of compounding where the interest or return earned on the money also earns money and builds a snowball effect on wealth. The earlier you start, the greater the compounding effect you’ll have.

Find Free Money

Yes, it exists! If your employer offers a company matching program, guess what, there’s free money in it. Yet so many women I know don’t take advantage of it!

Many companies will offer a pension or retirement savings program where the employee (i.e. you) contributes a certain amount towards your retirement, and the employer matches it up to a certain amount. This could be a defined benefit (DB) or defined contribution (DC) pension plan, or it could be towards your Mandatory Provident Fund scheme (MPF).

There could also be a program where your company offers shares or stock options.

The point is that it is free money, and can equate to anywhere from 3% to 10% of your salary. It’s essentially turning down a 3% to 10% raise. Who would do that? Not me! Nor should you.

Be Patient

Remember that saving for your retirement is a long-term process but it’s also one where the benefits of your savings multiply the earlier you start, and the longer you hang on to it.

What matters most is that you put away a certain amount, big or small, on a regular basis. It requires patience and discipline, but before you know it, you’ll have accumulated a sizeable nest egg, one that will allow you to enjoy a dream retirement!