Are you nervous about investing in the stock market?
Or maybe you’re worried about how to manage the ups and downs that come with it? Investing in the stock market is one option, but other ways to invest and save for a comfortable retirement are.
However, if you’re not comfortable with investing or don’t have the money to invest, there are other ways to save. In this blog post, we’ll discuss some of those other options and how to save for retirement without investing.
Why you need to invest in something and not just cash
Inflation is the enemy of retirement savings and a comfortable ongoing 20+ year retirement.
Inflation reduces the purchasing power of your money by more than 50 per cent over 20 years – every dollar/pound you spend at the grocery store today will buy less next year.
That means that if you have a $20,000 lifestyle, your purchasing power will have been reduced to around $10,000 in roughly 20 years. That’s a loss of roughly 50%. Inflation is a silent but relentless financial destroyer.
It has no mercy and keeps going relentlessly until every dollar you saved has lost 50 per cent of its purchasing power. Cash is not an investment and is losing purchasing power every year guaranteed.
Why you need to collect more assets than liabilities.
If you are not able or willing to invest in the stock market / the great companies of the world, you will need to find other assets to invest in.
An asset goes up in value and provides you with an inflation-adjusted income over time, i.e. the income keeps going up in line with inflation.
The more assets you have, the greater your chance of your networth going up and your income going up.
Liabilities, on the other hand, suck money out of your life. Things like cars, tv’s and even your main home can be liabilities as they are taking money from you to store, heat, light, maintain and fix them.
This means you should look to invest in assets like properties and businesses – normally, this would be through the stock market, i.e. investing in the great companies of the world, but in this case, it may mean investing in local or your own business.
Just remember the golden rule of investing: Diversify your investments or don’t have all your eggs in one basket.
When, not if things go wrong, you don’t want all your investments to tank at once because you have too few or all the same kind of things.
“If you don’t find a way to make money while you sleep, you will work until you die.” Warren buffet
Here are a few ideas for saving and investing outside of the stock market.
1. Make a list of your short-term and long-term goals.
What does good look like now and in the future?
Having a budget will not be enough; you also need a plan to do all the things that will make life great for you.
Having and life and financial plan will help you figure out what will make life now and in retirement great and give you ideas on how to find or create the funds you need.
You should also have a list of different goals you want to achieve in the future, both small and big ones. This will help you decide where to invest your money to get closer to these goals.
You should also think about what kind of lifestyle you are aiming for now and in the future.
Is living in a big city important to you?
Or maybe you dream about moving abroad in the future?
Make sure that your current spending does not prevent you from reaching these goals.
If your goal is to move abroad, what things do you need to consider to make this happen?
Are there some changes needed on how and where you spend your money?
Start planning now and living your best life asap.
2. Save your money in a high yield savings account (if you can find one)
One way to start saving for retirement without investing is to save your money in a high yield savings account.
A high yield savings account is a bank account that offers a higher interest rate than a regular checking or savings account.
This type of account can help you save money faster since the interest rate will compound over time. But and it’s a big, but finding a high-interest savings account can be the hardest part.
3. Create a budget and stick to it
Another way to start saving for retirement without investing is to create a budget and stick to it.
When you create a budget, you are essentially creating a plan for how you will spend your money.
If you are not currently following a budget, then it is time to get out the pencil and paper and start writing everything down.
This will allow you to see where your cash goes each month, which can help you identify problem areas.
Once you have identified the problem areas, take some time to create a reasonable budget that allows you to save money.
4. Make saving for retirement a priority
Prioritise paying yourself first and then spending what’s left. This is the key to saving and, in this case, building retirement savings.
Set up an automated system to save money, taking the weakest link – you – out of the decision-making process. If you make saving for retirement a priority and automate it, your savings will start building themselves.
You will also need to be conscious of how you spend the rest of your money against short, medium and long term needs.
5. Invest in yourself
Invest in yourself as your greatest asset. When you invest in yourself, you are essentially buying something that will help you grow personally or professionally.
For example, if you want to learn a new skill or gain some knowledge about a certain topic, consider taking a class online or at your local community college.
You could do any of the below to increase your current or future earnings or lifestyle.
- Coaching or training
By investing in yourself, you can increase your chances of success in your health, wealth and happiness.
6. Contribute to a tax-advantaged accounts
Tax-advantaged accounts where you avoid tax or get the tax back are a great way to build savings.
These can include savings accounts where you earn interest tax-free or retirement savings accounts where you might get the tax back you have already paid.
These types of accounts are dependent on where you live in the world and what your country has on offer or allows but are definitely worth considering in your retirement savings plan. Just be mindful that the interest rates on the account may not be keeping pace with inflation.
7. Open a retirement account with an automated savings plan
Another way to start saving for retirement without investing is to open a retirement account with an automated savings plan. Open the types of accounts I mentioned above if you want to save money and not worry about it.
You can contribute to these special accounts on a regular basis, which will allow you to accumulate quite a lot of money over time. Additionally, the automated savings plan will do most of the work for you!
8. Start a side hustle you never want to retire from
Another way to start saving for retirement without investing is to start a side hustle.
In case you didn’t know, a side hustle is a great way to make some extra cash on the side of your normal job or income stream.
It doesn’t matter if you have been employed for five years or 50 years. When you have a side hustle, you will be able to save more money for retirement and enjoy yourself at the same time.
Just be sure to put aside some of the extra cash so that it does not interfere with your life too much. If you are struggling for ideas for a side hustle, these questions might help with a few ideas
- What are you good at?
- What do you like doing?
- What does the world need?
- What will people pay you for?
9. Keep your job during retirement
Keeping your job during retirement, providing you don’t hate it, is a way to keep your income coming in.
It is pretty difficult to stay active in the workforce when you are older, but there are some people who do it every day.
If you want to continue working on a full-time or part-time basis after you retire, then consider keeping your job throughout your entire golden years. This will allow you to retain a sense of normalcy in your life and save quite a bit of money.
10. Do not retire
How about never retiring?
This might seem like a strange solution, but it can be extremely beneficial if you want to keep working after becoming eligible for Social Security.
You could continue your current job, a different job or create your own side hustle you don’t want to retire from. And by working during your later years, you will be able to continue to save for retirement without investing.
However, don’t forget one day, you won’t want to or won’t be able to work anymore; what will you live off then?
Make sure you save and diversify your income sources for when you can’t or don’t want to work for money anymore.
11. Keep an eye on your expenses and make cuts where necessary.
You might not know it, but there are probably many areas in which you can save money. Make a budget and see where you can spend less so that you have more disposable income to invest across the different areas of your life. Can you
- Get it cheaper elsewhere
- Haggle on the price
- Cut down or out the item
Any of these could help you keep more of your money up to and into retirement
12. Live below your means and avoid lifestyle inflation.
There are many reasons to avoid lifestyle inflation, if not just for the financial ones.
We have already mentioned the inflation of goods and services, but there is also the potential inflation of your lifestyle to be aware of.
Lifestyle inflation is where you increase your spending on certain or all things after achieving a certain goal.
You might have bought cheap clothes when you were young, but once you got a job and started earning more, you might have shifted to buying luxury clothes.
Watching your neighbours, the Jones buy more and more stuff can also if you are not careful to encourage you to start spending more and more each year to keep up or surpass them.
Be careful to compare your life to others; don’t forget you are not playing the same game.
13. Educate yourself about personal finance and wealth-building
You need to learn about money and how you can make it grow. Learning about money is the best way to manage, keep and grow it. You can imagine what the opposite effect on your money is. If you want to learn about the money you can do 3 things
- Do it yourself through books and podcasts
- Get help from a financial life planner or coach
- OR get someone to do it for you like a financial advisor.
Summary: How to save for retirement without investing
Saving for retirement doesn’t have to involve investing in the stock market. There are a lot of different ways to save, and each person’s situation is unique.
Planning what you want good to look like is the key starting point to a great life now and in retirement, whatever that means to you.
Creating or maintaining a source of income into retirement by working full or part-time and starting a side hustle can help you meet your lifestyle needs and continue building savings.
Saving, budgeting and building your personal finance knowledge are just a few of the ways to help you start saving for retirement. The key is living below your means so that if life throws something unexpected at you, you have enough savings in place to get back on track.
Set up your free clarity call for more information or one-on-one support now. Together we can plan a bright future where money doesn’t control you anymore.