Welcome to today's video.
What are the first steps of
retirement planning?
It is important that we set up
our plan for retirement so
that we can actually retire
one day.
So today I am sharing the
exact steps to take in order
to plan for your retirement.
Let's dive right in.
All right.
I know it can be overwhelming
to plan for your retirement,
but honestly I'm going to
break it down into what are
the first steps of retirement
planning so that you can take
these exact steps and have
your retirement plan laid out.
First,
I just want to set up the
picture for us.
We want to make sure that we
have our spending plan set up,
that we know what's coming in
and what is going out.
We want to make sure that we
have an emergency fund set up
and that we have that
emergency fund in a high yield
savings account so we can earn
a little bit more interest on
our money that is just sitting
in cash.
And then we want to make sure
that we have our high interest
debt paid off.
That is going to make a big
difference in growing our
wealth because we don't want
to be paying more in interest
in that high credit card debt
interest then we can make in
our investments,
and that way we can take the
steps to invest in order to be
able to retire.
The first thing we want to do
is to set our retirement goal.
How much do we want to have
invested in order to retire?
And I do go into more detail
about this in another video.
I will leave a link above.
But essentially we want to
take our annual expenses in
retirement,
multiply that by the number
25,
and that is the amount we want
to have invested in order to
retire.
So that would be our
retirement goal,
the amount we want to have
invested.
To give you an example,
if your annual expenses are
$40,000,
you multiply that by 25,
you would get $1 million.
So we would want $1 million
invested in order to retire.
I know when I figured this
number out,
I was super excited because I
had no idea how much it was
going to take to retire.
Would it be a million?
Would it be 2 million?
Would it be 3 million?
Could it be 500,000?
I had no idea,
but I found this formula and
that is what I have used to
help me know exactly how much
I would need to retire.
Comment below and tell me if
you have your financial
freedom number or your
retirement number.
And then going along with
this,
we are going to move to step
two,
and that's to know what our
expenses will be in retirement
or have at least a good
estimate.
We want to consider all of the
different expenses we will
have,
and it could be comparable to
our expenses right now,
but perhaps we have a mortgage
payment that we are going to
have paid off by the time we
retire,
or perhaps we have an auto
loan that will also be paid
off by the time we retire.
But also when we are older,
we probably will increase our
healthcare expenses,
but maybe we are not going to
be traveling as much.
So get a good estimate on the
expenses you would have during
retirement.
This way you can more
accurately calculate your
retirement number.
And then going back to that
retirement number,
step three is to figure out
that retirement income.
So I know we figured out our
end goal,
but in doing so,
we actually figured out what
our monthly income would be
because we are able to
withdraw 4% of our money every
single year,
which is adjusted for
inflation.
And that would be the amount
we would be living off of.
So make sure you are
comfortable with that amount.
If you think you're going to
spend a lot more than that
amount,
then you may need to invest
even more money.
Or maybe you're thinking,
ah,
there's still way I'm going to
spend that much in retirement.
So you could reduce that
amount,
but just feel comfortable with
that amount that you would be
withdrawing every single year.
And for me personally,
since I am officially retired,
even though I have this
business that I work on,
but retirement means something
different to everyone,
it could just mean that you're
lounging on the beach and just
playing all day and not doing
any kind of productive work.
Or it could mean that you do
start a side business or a
side hustle or have a
part-time job.
It's up to you how you define
retirement.
But however you define that,
make sure you feel comfortable
with your numbers.
And then step number five,
and this one is really
important.
We want to maximize those
retirement contributions.
We want to be investing as
much money as possible as soon
as possible so that we can
take advantage of compound
interest.
The more money we invest now,
the more money we are going to
have later.
And that's not to say you need
to be sacrificing everything
right now so that you can have
so much money in retirement.
We need to still be enjoying
life right now and doing the
things that we want to be
doing,
but sometimes there are some
short-term sacrifices we can
make to increase that
long-term happiness.
For example,
I did a lot of traveling in my
twenties and thirties and I
really enjoyed that,
but I wasn't being extravagant
about my traveling.
I wasn't traveling first
class.
I was traveling within my
budget within whatever amount
I had already in my savings
account.
I've never paid credit card
interest.
I don't believe in that.
So I would put the expense on
my credit card,
but I would pay it off before
I was getting charged any
interest.
So I was still living within
my means,
but I was spending money on
things that brought me joy,
that brought me lasting
happiness and tried not to
spend as much on the instant
gratification things that I
would just forget about in a
week or two.
And yes,
I did do that before I figured
out this whole financial
freedom process.
I did spend a lot of money on
clothing and looking back,
I could have put a lot of that
money toward investing had I
have known what I know now.
Hence why I am sharing this
information with you now so
that you can get started right
now.
One thing that I did do during
my twenties and thirties while
I had a nine to five job
though,
was invest in my 401k.
I invested at least up to my
employer match.
So I am really glad that I did
that step at least.
And then I also,
in my thirties,
I should have done it in my
twenties,
but in my thirties,
I opened up my own investment
accounts and started investing
in those accounts as well.
And I also started investing
in real estate.
I did buy my first property
when I was 25,
but I didn't buy my second
property until 10 years later.
And then I bought a couple
more after that.
And if I could go back,
I would definitely invest more
in the stock market and more
in real estate.
But of course I can't go back.
So I just try to continue to
improve over time.
I am glad that I did make the
investments in the stock
market and in real estate when
I did,
and I didn't do it any later.
If you're interested in
investing in the stock market
and you want my help,
I have a free masterclass
going over how I can help you
invest in the stock market.
I will leave a link below in
the description.
You can click on that link and
watch the free masterclass.
And then number six on the
steps to retirement planning
is to make sure and minimize
our risk.
There are a lot of risks with
investing.
We want to make sure that we
are taking calculated risks.
We still don't want to be just
leaving all of our money in a
savings account.
We want to invest that money,
but we don't want to be super
risky and not be able to sleep
at night.
So we want to make sure we are
taking a calculated risk so we
can definitely invest our
money in stocks in an index
fund that has a whole bunch of
stocks inside of it.
It's a very easy way to
diversify and minimize our
risk,
but still have enough risk
that we are getting a high
return.
And then when we are in
retirement,
we can continue to reduce that
risk to where we feel
comfortable,
so we could switch some of our
stock investments over to bond
investments,
and that will help to preserve
our wealth.
So these are the first steps
of retirement planning.
Comment below and tell me when
you want to retire.
I'm curious to know.
And if you found this video
helpful,
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screen.
Thanks so much for watching.
I'll see you in the next
video.