Financial wellness isn’t about having a lot of money – it’s about being mindful of your spending and saving habits, and making sure you’re on track to meet your long-term financial goals. If you want to retire by 40, you need to start thinking about your finances now.
First, take a close look at your spending. Where are you wasting money? Are there any areas where you could cut back? Once you have a better understanding of your spending patterns, you can start working on a budget. A budget will help you make the most of your income and make sure you’re putting enough away for retirement.
Second, start paying off any outstanding debts. This will free up more money to save for retirement. If you have high-interest debt, like credit card debt, consider taking out a personal loan to pay it off. Loans online same day deposit can be a great option if you need money fast. Just make sure you compare interest rates and fees before choosing a lender.
Is It Possible To Gain Your Financial Wellness And Retire By 40? Let’s See What Data Says
Ever heard of the term financial wellness? Maybe or maybe not. Maybe you’ve heard of it but have no idea of what it is or maybe you know what is but still want to get more info regarding it. That is the drive behind this article.
Financial wellness is important, especially for those looking forward to retiring. A 2021 report from Statista from a survey done among retirees in the US indicated that only about 85% of the respondents were confident in having adequate money for their retirement period. The other 15% were not too confident or had no confidence in the money they had for the future.
Is it possible to gain your financial wellness and retire by 40? The answer is yes. If you pay more attention to your financial well-being, you can be sure to retire by 40 and live a financially stress-free life later on.
How will you do this? Let’s get to the answer. First, let’s try to understand what financial wellness is.
The Definition Of Financial Wellness
This refers to a person’s overall well-being and absence of money-related stress. June Belknap from Pwc Strategy refers to it as ‘freedom from stress, ability to live your life and achieve the goals that you have now and in the future.’ It is a result of successful expense management.
Financial wellness is an important part of overall employee well-being and consists of physical, mental, and financial wellness.
Why is financial wellness important?
1. Leads To A Happy And Healthy Employees
Financial stress can result in anxiety or depression for anyone including the employees. This can greatly affect their overall health and their mood. If the financial stress is solved, the overall health and mood of employees will be boosted leading to a happy and healthy lifestyle.
2. Increases Work Productivity
Let’s take this scenario. You have a very stressful life that has led to heart problems. Will you go to work in this condition? Of course not. Let’s not take the condition to a worse situation. Let’s say you manage to go to work under stress, how will the productivity be? It will be bad, right?
A certain survey done by Calvary Finance in more than 10,000 Americas, found that companies lose about 500 billion a year due to employees’ financial stress. This shows that the issue needs to be addressed seriously.
3. Leads to Early Retirement
If you manage to balance your financial life well and plan for it early enough, you can save a lot leading to early retirement. Who wants to work in a 9-5 job all his life under pressure? If you love that, then well and good. Just know you are missing a very much enjoying life as a retiree with adequate money.
So, how can you gain your financial wellness and retire by 40?
Use An Early Retirement Calculator
A retirement calculator helps you determine the amount you’ll need after retirement. It takes in personal info like your age, details of current income, savings, investments, expenses, and the age you want to retire with.
Let’s take an example of the below calculator from Bankrate. We’ll call it the retire by 40 calculators that will give an idea of how to retire by 40.
- Let’s say your current age is 25
- Age of retirement – 40
- Annual household income – $50,000
- Annual retirement savings – 8%
- Current retirement savings – $100,000
- Expected income increase – 2%
- Income required at retirement – 90%
- Years of retirement income – 40
- Inflation – 2.9%
The output is that you’ll run out of money at 51. Hence, you need to make realistic adjustments. For instance, if you put the below values.
- Current age – 25
- Age of retirement – 40
- Annual household income – $100, 000
- Annual retirement savings – 15%
- Current retirement savings – $350,000
- Expected income increase – 5%
- Income required at retirement – 50%
- Years of retirement incomes – 40
- Inflation – 2.9%
The output is that you’ll run out of cash at 55. The more you adjust the values, the more the years increase or decrease. If you have no idea of how to use the social security calculator for early retirement to better suit your needs, it will be better to get help from the experts.
Ask around or browse for legit retirement counselors who will help you carry out your calculations.
Other Ways to Gain Financial Wellness
Make Use of the Financial Wellness Programs
Financial wellness programs help employees better manage their finances and reduce financial worries. June Belknap urges that ‘when you think about any type of financial wellness program, it has to take a step beyond educating people and ensure that there is a very seamless way for people to take an action even in the absence of perfect understanding of knowledge.’
That means that these programs should equip you with skills to better manage your finances. This can be done through counseling and coaching on specific topics.
Use the Available Financial Wellness Tools
These tools make it easier for employees to get coaching and on-demand financial advice on a digital platform. Some employees may not feel comfortable talking with a person and hence opt for these tools for self-exploration and education.
Set Savings Goals And Find a Way to Increase It
From the above early retirement calculator, you’ll note that increasing the savings, increases the years when your cash will run out. Hence, you’ll have to find a way to increase your savings by making an effective budget and investing in an appreciating asset.
Surround Yourself With Like-Minded Individuals
It’s important to get people who want to talk about financial stability, savings, and retiring early. They will act as a motivation to achieve your goals. However, if you surround yourself with extreme money spenders, your goal of retiring at 40 will just be a dream.
Use the Available Company Perks
Some companies offer perks like contributing to people’s student loan debts, giving free food, giving out travel tickets, and so on. These perks can help you save a lot in terms of eating out and travel expenses thus increasing your savings.
Conclusion
Financial wellness is not just about financial literacy, it’s the skills and actions you take to gain financial stability.