“When we are young, we use time to exchange for money. When we retire, we need our money to generate money”
To achieve the above, we need to squirrel savings from our salary every month to funnel them to investments so that when we retire, the income from investment can cover our expenses.
Our simple formula for Savings is :
Monthly savings = Monthly Salary – Expenses
If we cannot manage our expenses, not only we do not have Monthly Savings, we may end up in a deficit. Be careful about going too deep into a debt hole. Not only we may not be able to plan for retirement, we may end up spending a fair number of productive working years paying down the interest and debt.
It is best to start off with saving monthly as early in our working career as possible. It is important that our expenses do not increase when we get a higher monthly salary due to promotion, increment or change of job. In this way we can squirrel more money into the RESERVES “O” and INVESTMENT “O”. The more the savings, the faster we can bulk up our RESERVES and INVESTMENT “O”s.
Expenses should only go up due to a change in our life milestone. This includes buying a house, getting married and having kids. Hopefully, monthly salary continues to grow to cover the additional expenses.
Tri-O Retirement Plan works with you to create a monthly budget for expenses. Annual and one off expenses like insurance premiums, holidays, car repairs, gifts etc will be taken into consideration in creating the monthly budget. Once this is fixed, Tri-O Retirement Plan will work with you to channel the Monthly Savings (Monthly Salary – Expenses) into the RESERVES and INVESTMENT “O”s. This discipline is important. It ensures that we save more instead of spending more when our income goes up.
If we receive an annual or one-off bonus from work or if our company provides us with stock options and we manage to cash out the options, we need to channel these additional money to our RESERVES and INVESTMENT “O”s. Maybe we can give ourselves a little treat but theoretically if we have worked out our expense budget correctly, we would already have set aside some money for enjoyment.
Unlike some other models or financial coaches, Tri-O Retirement Plan does not propose a magic number to save. For eg, save 20% of your monthly salary. If we are discipline enough with our expenses, we may end up saving 10% of our monthly salary or 70% of our monthly salary. Key is to manage expenses so that we can set aside savings every month to fund our retirement.
TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.
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