Monday, April 17, 2017

Saving for a Rainy Day

Saving money for retirement, legacy, charitable giving, and lifestyle can be extremely difficult for most people. My peer group suffers the “Disease of Fixed Expenses”. This is where all the bills and obligations need a certain # of dollars every month to break even. Avoiding this trap with family, relatives, and other financially demanding types at your heels is not simple.
The article Six habits of successful investors gives basic common sense advice that is universal.
Develop a long-term plan—and stick with it.
Be a supersaver.
Stick with stocks, despite volatility.
Be diversified.
Buy low-fee investment products that offer good value
Focus on generating after-tax returns.

Creating a savings plan that everyone (your entourage) agrees to is the first step.  Fully fund your Roth IRA's, 401Ks, other pension obligations before you spend any dollars.  Prepare you budget with the money left over from the savings plan, not the opposite directions or there will never be any.

Your savings on average will double every 6-8 years depending on the prevailing interest rates and net returns on your investments. If one could save $100,000 by age 35, one would have $1,600,000 at age 67 by leaving the money alone.       

The greatest misconception that many have in our shoes derives from an absence of financial education. Most of us had none. There is the simple fact that most, therefore, do not get, and if at all, not until too later in life:  money saved, can actually work for you. Yes, that is it. That is correct. Money in the bank can do the equivalent of shifts for you.  In 2016, one million dollars can reasonably bring you in $5000 a month; two million dollars can bring $10,000 and so on.  And when you are in your 60s and 70s (yes you might actually live that long), not having to work those shifts is a blessing.  Think about it: stored work.

The biggest mistakes that my colleagues and I have made concerning retirement are.

1.    Conspicuous consumption

2.    Divorce

3.    Unnecessarily expensive cars (try a Saburu-80-90% of a luxury car)

4.    House poor

5.    Thinking that your home equity is your retirement money. You still have to live somewhere.

6.    Forgetting you will probably live more that 18-20 years past retirement without a check.

7.     Setting limits on your entourage. 5 cell phones and 4 cars can add up.

8.    Severe illness can wipe you out.

9.    Costco $10-15 wine tastes almost as good the $50 wine after the first glass.

10.   Not staying in good physical shape

11.   Etc.

12.   Etc.

In conclusion, save while you are young.

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