Are you a late starter with investments? Here is how to make up for your missed years

Saving money is relatively simple, you just spend less than you earn, that’s it. Investing it is a different proposition altogether. It takes one forced visit to a financial advisor to realise that while you have been doing the former for almost two decades, the latter has been totally missed out.

Many of us get such a wake-up call in our late thirties or early forties and ask ourselves a panicky question. What can be done now at this stage? Well, if your mind is made up, you can still do a lot. Here are a few ways to ramp up your investments to cover up the shortfall of previous years.  

Figure it out
If meeting an advisor and confessing to being a late starter feels embarrassing, use the internet. Online financial planning tools can indicate just how much you need to accelerate your investments to fulfil retirement goals.

What’s the source?
Before considering where to invest, it’s important to think about how you’re generating that money. Are there more ways to save? Depending on your retirement goals, you might need to be saving more than 20% of your income in your fifties, according to financial advisors. Others advise simply investing as much as possible.

Get very aggressive
They say the journey of a thousand miles begins with a single step. Similarly, investing for your retirement requires you to make a start somewhere. The sooner you start, the more time you have to catch up with what’s been missed so far. Don’t spend all your time comparison shopping.  

Work longer
One of the simplest ways to extend your retirement savings is to plan to work longer. Consider becoming a guest lecturer for post-graduation courses in the field you work in.

Alternatively, explore a hobby that could generate some side income post-retirement or starting a part-time business.      

Clear old debts
Be focused on eliminating high-interest revolving credit, like credit cards or unsecured loans. A consolidation loan may help lower interest rates and it’s also much more easier to manage. Alternatively, set yourself a target to eliminate all outstanding debt from savings alone without liquidating investments.

Stash the cash
If you have received a bonus, put it aside for your requirements. Compare the pros and cons of additional life insurance, PPF or post-office schemes, which provides guaranteed income later in life.

Trim your expenses
If despite all these efforts, the gap between what you are investing and what you should still seems too vast, consider cutting down on what you are spending today. Maybe your next entertainment purchase could be a compact set of speakers and a small television instead of the huge home theatre set up planned. Reduce the length of your vacations and pick destinations that are closer and more affordable.

Adopt frugal attitudes
Think before you spend on everyday things. Maybe a smaller toast sandwich instead of the jumbo grilled one? Coffee at the local udipi joint instead of an upscale coffee shop? Taking public transport instead of the car while travelling during non-peak hours? You can spend like a king and retire like a pauper or vice-versa.    

Do stagger it
Understand your immediate needs, substantial expenses to be incurred a few years later and what you would need post-retirement. Accordingly, invest in short term, medium term and long term vehicles. Save an amount equal to three months’ income in a savings account. This can help you weather an emergency without dipping into retirement savings.

Admit the problem
Take a long, hard look at how many years you have missed out on so that the sacrifices required to make up for them do not hurt as much. Consider the fact that you are racing against time and evaluate the outcome of each action accordingly.