When you’re in your 20s, you don’t really think about retirement. When you get to your 30s you start to think about it but because you’re employed, you think you’re covered.
It can be all too easy imagining what your life will be like sitting back and enjoying your golden years. However, have you thought about how you can avoid financial stress when you get to those years? To avoid unnecessary stress, you have to avoid making one of the biggest mistakes most retirees make. In a moment, I’ll tell you what the mistake is and how you can prevent it from affecting your retirement…
Don’t spend all your active income
According to Mark Ford, active income is the money you make from your hard work. This includes the income you generate from your business. In comparison to an active income, you can get from your retirement annuity or pension from your passive income. You can only increase your passive income by getting better returns on your investments. What you need to do is increase your active income by working more ad save. This is because when you retire, you’ll give up your active income unless you’re still earning from your business. This can have a negative effect:
The longer you go without an active income, the harder it is to be stress free
If you rely on your passive income, it will reduce your ability to make good investment decisions. We all dream of growing old wealthy, but if you look around, you can see it isn’t a reality for most people. To achieve the lifestyle of your dreams during your golden years, you need a very large retirement fund or pension. Therefore, to make this happen, you end up opting for riskier investments in the hope of gaining bigger financial rewards. Unfortunately, this has the potential to kill your retirement dreams. So, to avoid this, there’s one way you can take the pressure off your passive income – work.
Build more skills so you can work part-time once you retire
Working part-time during retirement can reduce financial stress. In fact, a good number of retirees find that working part-time makes them feel better about themselves too. Now this doesn’t mean slaving in an office full-time. There are a variety of different things you can do to generate an active income later in life. This could be doing some consulting based on skills you earned in your former employment. Or you could start an own online business doing something that you love. If you own a business, you can still play a part in running the company, while deegating most work to others.
When you generate an active income, you don’t only make more money, but you can stop worrying about digging too deep in your investments. This can help you enjoy your retirement free from financial stress.