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1. Have an idea when you want to retire. The usual age range is 60-65.

2. Know the lifestyle you want to live, and this will be determined largely by your financial position now and then. Are you going to live as you do now or will you be improving on your current arrangement? Perhaps you are currently living in four-bedroom house in a nice community but you might want to trade this in for an apartment. Maybe you want to travel to places you have never visited. Maybe you will need to trade in the vehicle you now own for an earlier model.

3. Ascertain how much money will be necessary to maintain the lifestyle of choice. It is recommended that a minimum of 60% of your annual pre-retirement salary should be adequate as annual income in retirement. Have a budget that’s just for retirement.

4. Examine your current investments. This should also include your pension, health and life insurance so that you will have an idea how much funds you will receive when you retire. Will you be receiving a pension check each month, and will your life and health insurance be adequate?

5. Acquire the services of a trusted financial adviser. If you don’t already have one, you’ll need to find one soon. Ask your friends and co-workers for referrals.

THE MIDDLE YEARS

As investors shift into the 36 to 45-year-old mid-life grouping, their time horizon will begin to change, and so will their appetite for and tolerance of risk. It is inevitable, therefore, that the investment strategies will also be altered to suit these changes.

Such persons will gradually begin to lower their appetites for speculative stocks, preferring growth-oriented and/or income-generating stocks and bonds with good potential for capital gains but less risk, in addition to safer fixed-income government securities. At this stage, an investor should be looking to solidify the portfolio base and to build for retirement if he/she had started earlier.

If they are just starting, however, these individuals would have to, more than likely, contribute more to achieve their retirement objective. The general advice is that you should project your retirement expenses based on your needs. Think about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement social security and other sources of retirement income. Budgeting will be important in this planning process as well.

SOME BASIC RULES

Begin by determining your monthly income and expenses, identifying necessary and discretionary expenses. Some rules to live by include the mantra to save a basic 10% of your salary. Another rule is that your housing costs should be easily within your salary range.

Still another is that you should avoid purchasing motor cars which are expensive to maintain and provide inefficient gas consumption. If your goal changes, then revisit and revise your plans. You will need to do this if market or personal conditions change.

Real estate has historically proven to be a good way to beat inflation. But, do not put all your eggs in one basket. Focus on your asset allocation more than on individual picks.

How do you divide your portfolio between stocks and bonds will have a big impact on your long-term returns. Stocks are best for long-term growth. Stocks have the best chance of achieving high returns over long periods.

Importantly also, do not neglect retirement account options, a tax-free solution for those planning for retirement.

Other means of saving towards retirement include purchasing insurance and savings and investments. Ensure that you purchase adequate health insurance, as ill-health in old age can have a devastating impact on your savings.

Businesses should practice developing short term plans as well as long term plans in its strategy for sustainability. Planning in any form is important to the success of any endeavor. Plotting a future course makes sense in every way. Long-term planning is the responsibility of any leader and without vision we will indeed perish. Focusing merely on short to medium term outcomes can hinder growth and create obstacles in goal attainment. Long term planning with structured goals give meaning to daily activities.

In order for business to reap the greatest possible successes a projection into the future prospects must be done. Making arrangements and incorporating proactive strategies will undoubtedly create a situation in which the business can better handle unforeseen circumstances. Thinking of where you will be in the next five to ten years are great strategic moves to ensuring that your business will in fact be around for those very years.

Long term planning does not equal profitability, what it does is place you and your company in a better position to make prudent business decisions and to better handle external shocks and uncertainties.

In considering and developing a long term plan for your business, there are a few essential points you must consider:

1. Be flexible in your business plan. Almost every company that has been around for 50 years or more has transformed itself a number of times. So when you create your long term business plan, be aware that you will always want to optimize new opportunities as they arise.

2. Establish secure and adequate lines of financing. Small businesses can’t survive and continue to grow for decades without proper financing. In order to stick it out for the long term, plans for financing – capital injection must be a part of your plan.

3. In looking to the long term don’t allow your company to fall behind in technology. New technology both in hardware and software gives small businesses the tools to compete more economically and efficiently. The technology available today will be either obsolete or in a much advanced format in a decade or so. It is important to be flexible, stay alert and keep abreast of technological changes that can affect your productivity.

4. Always reinvest money into your business. Instead of getting the BMW you have been dreaming of in the first year of your business, consider putting the money back into marketing, office equipment, or employee benefits. Try always to keep your business moving forward putting enough funds in reserve in the event of financial difficulties in the future.

5. Be cautious in selecting strategic partners whether individuals or companies. A good synergy can position your company for long-term stability and growth. The reverse can also happen where a bad partnership can bring down both companies.

Failure to plan for the long term can result in defeat, crumbling at the feet of your obstacles instead of rising to victory. Remember, planning for the distant future just may help your company flourish in the short term, where you will personally benefit and enjoy it.

1. Plan, plan, plan. Most persons will retire by 65 years of age, and many of them will live well beyond the age of retirement. We must plan for retirement and continue to plan throughout retirement. The earlier we begin the better.

2. Keep occupied. Work provides structure in our lives. It provides an opportunity to contribute and interact with other people and gives us a sense of purpose. It is important that we keep ourselves occupied during retirement.

3. Volunteering helps. It will be difficult for many people to get paid employment during retirement but we can find fulfillment in volunteering. This allows us to give back and is also an opportunity to keep ourselves occupied and to feel useful and worthwhile. We can become involved in church activities, service clubs or numerous charitable organizations.

4. Pay attention to your finances. This is a big one. Most people live longer than their savings. In Jamaica, where we have limited retirement plans, many people use real estate as a good buffer. I’ve seen, for example, where many people convert their homes to accommodate a tenant and they themselves move into a smaller home.

5. Make practical changes. Make sensible lifestyle decisions. Many persons downsize; consider moving into a smaller space and get rid of some of the clutter. Make practical decisions such as moving out of a house with stairs, giving up a large house or the car, or sharing a house with family members or friends. Letting go can be the greatest challenge in retirement.

6. Deal with emotional issues. Retirement is a time of difficult transition. It involves a loss of job, the loss of income and the loss of friends. Remember, grieving is a natural and normal reaction to loss.

7. Enjoy your retirement. Most people, rich and poor, enjoy their retirement. Give, love, share and care, and you will find happiness.

Ever heard of “out of sight, out of mind”? Believe it or not saving money is a lot like that.

• Many people tell themselves, “I can’t save because I don’t earn enough.” Linking income and the ability to save. The belief goes like this, the more money you earn is the more you save. Not necessarily! People with higher incomes have more expensive lifestyles with more pricey toys – a nice laptop, a nice car, flat screen TVs, etc.

• To examine if there was a correlation between life savings and income, a study was done by two economics professors – one from Harvard and one from Dartmouth. The study involved 4,000 households near retirement and the results were surprising. They found that income has nothing to do with savings. Income only explained about 5% of the net worth of the households studied. A huge variation in wealth at every income level was found. While many low-income families had almost nothing, the same was true of many high-income families. Ever heard about those who win the lottery but end up broke?

• Income alone doesn’t explain wealth disparities. Some of the lowest earning households had managed to accumulate significant wealth.

• Chance events such as inheritances, medical bills, marital status and number of children explained about 4%, investment choices explained 8% and 75% was attributed to just saving money.

• If you can have a certain percentage of your income go automatically to savings (as in out of sight, out of mind), the battle’s already half-won. How much you make doesn’t matter as much as what you do with your money when you get it.

• Put your savings on auto pilot and change your financial future forever.

Many persons usually view their bonus as the extra spending money and it can be blown with a few days of shopping.

However, wealth experts agree that bonuses should be seen as additional savings and invested in order to gain high returns for the new year. A bonus is not a regular part of your income; it is a payment for your creativity and you should be creative about how you use it.

There is nothing wrong with spending some of your bonus on yourself. After all, it is a reward. However, like your income, a part must be put aside to continue earning on that reward for you.

A good place to put your bonus is towards an emergency fund. It will seem as if you are not using it for much, when if you should put this money aside at the end of the year for unforeseen tragedies in the new year, you can rest assured that you can cover your expenses.

Another investment option is a fixed deposit account. A fixed deposit account allows you to deposit your money for a set period of time, thereby earning you a higher rate of interest in return. Fixed deposits also give you a higher rate of interest than a savings account.

You can also use your bonus to reach a big goal that seemed distant before. Such goals as continuing your education, buying furniture, paying deposit on a car, clearing up a few debts, and so on, are great ways of using your extra money.

A retirement savings plan is another option. It does not matter how young you are, it is never too early to start planning for retirement. Visit a few banks and investment institutions and compare different investment schemes. The earlier you start to save, the earlier you can reach your goal of retiring a few years sooner.

Of course, your extra money should be diversified and invested for the long term as a bonus this year does not guarantee one next year.

So what are mutual funds? Simply put, a mutual fund is an investment that pools money from many investors which is then invested in various securities. Guided by the objectives of the fund, the investment professionals who manage the fund make asset allocation decisions to ensure optimum performance. Gains made by the fund are then reinvested or passed on to shareholders/unit holders by way of distributions on a prorated basis.

So, does investing in mutual funds make sense? Yes, it does. Mutual funds provide investors with a wide range of benefits and advantages. Chief among these are:

• Immediate diversification for their investment dollar – Diversification is very important for any portfolio as it helps to minimize one’s risk exposure. Mutual funds provide investors with broad exposure to global stock markets, bond markets and money markets. In addition to being diversified by asset class, mutual funds are also diversified by geographic and economic sectors, by market capitalization, as well as by the investment style of the fund’s manager or managers.
• Increased buying power and economies of scale – Some investments have minimum entry requirements (i.e. a minimum investment amount) which all investors may not be able to satisfy. However, mutual funds allow ordinary investors to stretch their investment dollar further as the minimum investment required is relatively low. Additionally, there is an opportunity to invest in higher yielding securities globally, and fund mangers are able to execute trades on the largest and most cost-effective scale.
• Active and professional management – Mutual funds are managed by experienced investment professionals whose full-time job is to ensure that the respective funds provide maximum returns for investors. These fund managers have instantaneous access to crucial market information which allows them to make key decisions quickly, like locking in capital gains during bull runs (upward swings in the market) and taking defensive actions during market downturns.
• Greater choice, convenience and flexibility – Investors differ in terms of their appetite for risk and investment objectives. Similarly, mutual funds differ according to their risk and return levels and objectives. Therefore, an investor is very likely to find a mutual fund that will satisfy his or her particular investment needs. Some mutual funds are geared specifically towards high capital appreciation (growth funds) while others are focused on capital preservation and/or generation of income (income funds). Balanced funds combine both growth and income objectives.

It is very important to note that with mutual funds; past performance does not guarantee future performance. However, as outlined above, an investment of this nature does make sense as there are a host of benefits that investors can be assured of.

For additional information and advice on mutual funds or other investments that may be right for you, speak to your investment adviser today.

But even with the funds you have at your disposal, are you wondering why you have not met your financial goals and are probably lagging behind on payments? You are probably one of many in the same boat waiting for something supernatural to happen. The reality is, however, that if you are not wise about how you manage and spend your money, your financial goals will never be accomplished or realized.

Two of the most basic concepts of money management include:
- Saving – the conservation of money
- Budgeting – a planned list of your expenses and income.

Saving doesn’t mean spending less, it involves knowing where you will be putting your money, how much you are saving and how to keep your savings going. This means that your spending would then have to be managed. This would then lead you to setting goals, figuring out how much money you can save, whether weekly or monthly, keeping record of your expenses and budgeting.

Bearing in mind that there is no formula to wealth creation or money management, there is information available to assist you in realizing your financial objectives. But having the discipline to save, budget or even invest is easier said than done. Faced with numerous amounts of bills and daily expenses, sitting with pen and paper, trying to put a budget together, probably doesn’t seem like a helpful tip; neither does saving money for a rainy day seem possible when your pay cheque cannot even cover your expenses.

But if you want to be money wise, you have to think budget. You can start by drafting a realistic evaluation of your net income. Do not include other monies earned such as overtime and bonuses, as this may not be consistent. You may instead put your bonuses and overtime monies in your savings. After making your budget, the only other best thing to do is to stick it out.

Historically, dividends have accounted for more than 40% of the stock market’s returns. They represent real cash in your pocket now. More than that, dividend-paying companies are among the most stable and least volatile companies on the market. The constant need to pay cash, means these companies are consistently profitable, and have management teams that are capable of keeping them that way.

What to do? Invest in stocks for companies that have consistently paid dividends (over a period of years).

Achieving these retirement goals cannot happen by chance or wishful thinking. It is attainable by conscious and realistic planning which must begin as early as possible. The earlier this planning is effected, the less burdensome and more attainable the retirement goals will be. Adequate retirement planning assumes basic needs such as food, shelter and increased health care costs are taken care of with sufficient capacity to allow one to indulge in some of the deferred activities of your working life.

VARIOUS RETIREMENT PLANNING OPTIONS

Planning for retirement is made easier by the availability of various pension-savings options. These savings options aim to assist the saver to achieve retirement goals by utilizing available tax benefits (p.s. do you currently use software for income tax calculations?). Segregating pension savings prevent them from being used for more short term consumption.

Pension savings should constitute a significant portion of the net worth of the average employed/self-employed person. With life expectancy increasing, the retirement years are also increasing and a well-planned retirement plan represents the difference between financial security and comfort on retirement as opposed to a marginal existence during theses years.

Individuals can save towards their retirement through superannuation funds and retirement schemes. A superannuation fund is a pension plan established by an employer for the benefit of his employees. On the other hand retirement schemes facilitate self-employed persons and those persons who are not members of a superannuation fund and are not employed in pensionable posts.

However, saving for retirement is not limited to these pension arrangements. If an employee believes his pension funds will not be adequate to meet his lifestyle needs on retirement, he should investigate and invest in other investment arrangements which are available from financial institutions.

Plan for your future; investigate retirement planning options now!