No Urgency
People would tell you not to worry about all this at the current stage in life because there is still a long way to go in life and hence there is no urgency for this process. There are others who would like to enjoy their period of youth and hence would not be willing to start some planning and saving, as this would eat into the existing finances available for spending. But the fact is that starting this process early with even small amounts can translate into large amounts at a later date. An early start is always good and the longer that one contributes to the cause the lower will be the amount required at a later stage in life because the earnings on the sum invested will do a lot of the required work. There has to be a firm resolve to start the process by setting aside small sums. These might not mean much at present but would be quite valuable at a later stage.
Lack Of Awareness
When people are in their youth their problems at the current stage seem to occupy a lot of their mind space. There are several choices in front of them which is what line of the profession should I go into? How will I tackle my studies? What about getting married and setting up a family? These are some of the common issues that attract the attention of youth and in the midst of all this, the issue of retirement planning looks like an old age problem that will have to be tackled sometime later.
Several young people are not even aware of the problems faced during old age. Since they have started earning at this young age and in many cases the earnings are also quite high because of the current economic boom across a lot of industries, the old-age factor is not considered and it does not seem to be a problem. Many people don’t realize that the problems that come with old age will come to everyone. The situation faced then will be very difficult to handle without a proper plan. Getting started is a very important point and one cannot be bogged down by thoughts that will ensure that the process itself never gets off the ground.
Low Income
As if the various problems in starting off the retirement planning process are not present then there is also the issue of low income at this stage in life. Most people in their twenties start their earnings with a low base. Even those who are management trainees start off with a base that might be comparatively big but is still low in absolute terms to have large amounts of savings. This is a basic problem that will plague most people. There is no way to tackle this issue but to gain experience and move on.
The low-income problem often seems to put a brake on the start of the retirement planning process. There might not be a large amount left after spending sums on various items. It might seem that there is no money left to enjoy at this age when a lot of people are having so much fun. At a young age, it might seem that enjoyment of life today is better than saving small amounts, which will not amount to much in the future. However, there is a basic concept called the time value of money, which says that money depreciates in value as time goes on. This low income will rise over a period of time but the low amount of savings can be tackled only if one is strong in their resolve to ensure that planning will start from this point of time itself. Low-income periods should be considered as the starting point for learning in life.
Save Money
The key point for an individual at this stage in life is that they have several expenses but these are not fixed in nature. For many people, various expenses might seem to be very basic in nature. For example, there are amounts spent by people for buying clothes, shopping or even entertainment like watching movies and going to pubs and restaurants. These expenses are present but the nature of the expense is important. These are not fixed expenses, they do not have to be spent every month and life will not come to a halt if these expenses are not made.
Most people are at such a stage of their lives that even when they have to make some expenses there is an element of savings that can be ensured. For example, if one wants to watch a movie then instead of buying a Rs. 200-ticket the same can be bought for Rs. 50 or Rs. 75. The movie will be the same but there is an amount saved that can be diverted for the purpose of retirement planning. This will result in such a situation that the person is also able to experience various enjoyments and there is also a saving against their name, which is on account of the fact that they have started their retirement planning process.
If there are a lot of fixed expenses for an individual then there is a need to ensure that proper planning saves them from the situation as the amounts there are freed up for other useful purposes.
High Impulsive Expenses
Wanting the best things around is a part of the everyday life of the individual these days. And nobody wants to wait for tomorrow. Today is the mantra and this also leads to a lot of impulsive expenses. There is adequate planning as well as there is an intention to save but when it comes to the execution the impulsive behavior often wins over prudence.
This would mean a situation where the person goes and spends various amounts on shopping or on buying some items without doing much thinking about the consequences of the move and the implications that this will have on their financial habits. This is classified as enjoying life. There is only one way to tackle this and that is by controlling impulsive behavior.
There are also various financial instruments available like credit cards and loans that are used to satisfy these impulsive habits. These often have a double impact in terms of disruption of the current financial plans as well as a carry forward of the financial impact in the future where one is still trying to get out of the mess created in the past. These have to be controlled and taken care of because they can bring the entire retirement planning process to a halt.
