It is difficult to be disciplined when your salary increases. Building savings habits, however, and giving them the priority they deserve, assists in avoiding the downward spiral of living beyond your means. This essentially means that you don’t let lifestyle inflation (spending more when earning more) take over and set you back. The longer you follow the pattern of spending more than saving, the more you risk falling behind in reaching your financial goals.
Where should you save?
A number of options are available from a retirement annuity (RA) to unit trust (UT) discretionary portfolio, or a tax-free savings plan. A qualified financial planner can help you determine which set of products is right for your needs, tailored to your unique circumstances.
The right plan is tailored to your needs
Your own vision of financial freedom or reaching retirement early (or at a reasonable age) might differ significantly to someone else’s. As with all financial plans, the right plan is one tailored to your needs. Your plan also needs to be revisited as your circumstances change. The financial planning process can help you determine if changes are needed, or whether you should rather stick to the original plan – which is often the hardest thing to do. You may be tempted to live more lavishly as you get salary increases along the way. Remember that these inflated living expenses potentially feed into your need for retirement savings – and therefore you should revisit your financial plan accordingly.