There are various retirement planning strategies to ensure you live a comfortable lifestyle in your golden years.
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However, it’s worth pointing out that planning for life after work changes when you grow up without much money. You may have different philosophies surrounding your finances and how you plan for the future.
How can you prepare for retirement if you grew up poor? GOBankingRates asked one successful entrepreneur how his financial upbringing is shaping his retirement plan. We also reached out to a financial planner for additional tips on preparing for retirement.
Planning For Retirement When You Grew Up Poor
Jeff Rose, founder of Good Financial Cents, recently shared with us how he regretted purchasing sneakers when he first started making money. He also explained how his past financial struggles have influenced his retirement saving strategies. Here’s are the two keys to his plan.
Save a Significant Portion of Income
“When you’ve moved from modest beginnings to financial success, saving becomes paramount for retirement,” Rose said. “Allocating around 15-20% of your income to retirement savings is a wise practice. It ensures consistent contributions towards your retirement fund, providing a financial cushion for your post-work years.”
While it can be tempting to want to treat yourself and upgrade your lifestyle when you first come into money, you have to remember that you still have to plan for the future. If you spend too much of the money you have coming in right now, you won’t be able to maintain your desired lifestyle when you stop working. If you grew up poor, you’ll want to prioritize saving for the future because you don’t want to end up in a dire financial position when you’re no longer able to work.
Diversify Your Investments
Rose spreads his investments across various asset classes, such as stocks, bonds, and real estate.
“This approach helps mitigate risk by reducing your reliance on a single investment,” he said. “Stocks offer potential for higher returns but come with greater volatility. Bonds are more stable but yield lower returns. Real estate can be a valuable long-term asset. The specific mix should align with your risk tolerance and retirement horizon.”
If you grew up poor and came into money as you got older, it’s essential that you take the time to research different investments and asset classes. If you want to maintain a certain lifestyle in your retirement years, you want to ensure that you have enough money coming in to cover the expenses. The best way to ensure that you’ll have the funds to live your desired lifestyle is to create income streams from your investments for when you no longer have a steady paycheck coming in from your job. If you didn’t have access to financial information when you were growing poor, you’ll want to invest in learning about this topic now that you have the resources to do so.
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What To Consider About Your Retirement Planning
“I’ve found that many who grew up in financially challenging circumstances have a commendable discipline and frugality, contributing to substantial savings,” said Tyler Meyer, CFP and founder of RetireToAbundance.com. “Transitioning these clients into retirement involves a crucial shift in mindset — reminding them that their savings are meant to be enjoyed.”
Here are a few things to consider about your retirement planning if you didn’t have much money growing up:
It’s OK To Spend Money on Hobbies and Interests
“For those who are naturally frugal, the challenge lies in encouraging them to allocate their savings for meaningful experiences,” Meyer said. “Beyond the conventional focus on financial security, I guide clients to invest in relationships and activities that enhance their overall well-being. This could involve travel, pursuing hobbies, or engaging in community events.” If you didn’t have the money for hobbies or unique experiences when you were younger, you can treat yourself as you get older because you want to ensure that you have something to look forward to in your golden years.
Adjust For Economic Factors
“Comprehensive financial planning is paramount, addressing healthcare costs, potential long-term care needs, and the impact of inflation,” according to Meyer. “Regular plan reviews ensure alignment with evolving needs and economic changes.” You’ll want to consider the realities of external economic factors that none of us have any control over when planning for your retirement.
Remember Why You’re Saving
“Effective retirement planning for this demographic involves not only securing financial stability but also leveraging resources for a retirement rich in experiences and relationships, Meyer stated. “By emphasizing the purpose behind their savings and guiding them toward meaningful allocations, we strive to create a retirement that is not only financially secure but also deeply fulfilling.”
You can’t forget why you’re saving and setting money aside for the future when you could be spending it today. The goal is to live your desired lifestyle and to have meaningful experiences as you get older so that you don’t feel restricted because of a lack of financial resources. Now that you changed your financial situation, you want to continue improving so that you can live a high quality of life.
Closing Thoughts
Just because you grew up poor doesn’t mean you have to spend your golden years feeling like you can’t afford anything. It’s crucial that you get into the habit of setting money aside for the future while trying to educate yourself on financial topics so that you never end up with financial struggles again.
You may also want to alter your investing approach to ensure that you have your finances set up so that you can enjoy your life when you exit the workforce. As always, we suggest speaking with a financial professional to ensure you’re prepared for the next stage of life. You’ll want to organize your finances based on your unique situation with income and taxes.
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This article originally appeared on GOBankingRates.com: I Grew Up Poor: Here Are 2 Ways I’m Preparing for Retirement
