“Save for retirement starting with your first paycheck” is an oft-repeated financial advice, but it is also commonly ignored. People would usually say, “I’m too young, it’s too early to plan for retirement,” or “I deserve to spend and enjoy my money right now.” But before you know it, you’re too busy with a promotion at work, you have a family to provide for, and you’re overwhelmed with a host of other personal reasons.
There’s always going to be a reason not to start, but the best time to start saving for retirement and investing is yesterday. This financial nugget of wisdom is often shared by Lianne Martha Laroya, a licensed financial advisor and author of “OMG! Where Did Your Sweldo Go?, who gamely shared her expert advice for this article.
Here are five reasons why retirement planning should start now!
1. Time is your ally.
Generally, investing is the best way to make your money grow. If you start saving and investing early, you will gain higher earnings as your money will have more time to grow. Warren Buffet once said, “The rich invest in time, the poor invest in money.”
Aside from investing, you should also keep in mind your spending habits. Make or break your buck. It’s your call.
Read more: 5 Habits of Money Smart People
2. You should take advantage of compound interest.
Compound interest is basically interest calculated on the initial principal (amount deposited into the investment account) PLUS the accumulated interest of previous periods of a deposit or loan.
Compound interest can be thought of as “interest on interest,” and it will make a deposit grow at a faster rate than simple interest, which is interest calculated only on the principal amount.
3. The economy is looking up.
According to Lianne, one thing you have to remember about the performance of the stock market is that no matter how many times it goes up or down, it will always bounce back to positive trends. There has been no annually consecutive negative Philippine stock market performance in recent years.
Lianne also points out that the Philippines is at a demographic sweet spot. More workers, meaning more money goes around, which makes for a healthy economy. The Philippine economy is also afloat largely due to remittances of OFWs.
4. You have more disposable income and less responsibilities.
People normally don’t think about investing until they have a steady flow of income, they are thinking of starting a family, or they’re at a stable point in their careers. But actually, investing should already be a financial goal at a young age.
The time before you are beset with big expenses like a car or your own family’s stipends is when you should actually dive right into investing since that is when you are free of major financial responsibilities and you have more disposable income to save and invest. Should you invest at a much later time in your life, consult with an investment adviser on how to best meet your financial goals.
5. You can retire comfortably and in style.
Filipinos will also value close-knit family ties. When a person reaches old age, it is customary for their children to care for them when they retire. But wouldn’t it be comforting to know that you can enjoy financial independence during retirement without having to depend on your children for support?
Begin investing, planning for retirement, and saving your money as early as possible and you can sail away into retirement knowing you’re financial secure and stable.
Saving up for retirement through investing is not complicated, nor is it just for people with six-figure incomes. When investing, think positive and think long term.