Your Future Depends on It

Life consists of many different, and small, actions that create outcomes in a desired manner. This is a double-edged sword for many of us. Should we wish to purchase a new car or save for the future education of our children? Can we live in the current home or should be buy a much larger one?

The biggest challenge that American citizens face is one of priorities. Our country offers so much in potential personal and financial growth opportunities it becomes overwhelming for many people causing difficulties. Do I wish we had a different system than the current capitalistic markets? No way! However, I do wish to help people make more sound decisions with their hard-earned money.

An analysis of the savings rate, defined as the ration of money saved by individuals or families to their disposable income (income after taxes), reflects periods of time in which savings diminishes far below the required level to sustain the futures of the savers. Based on a review of the personal savings rate in the United States for the years 1960 – 2020, savings ranges were a low of 3.6% in 2007 and a high of 13.7% in 2020. 

The explanations for the differences in savings rates could be many different reasons – concern for the future due to the pandemic as in 2020 or loss of a job due to economic downturn effects. One obvious impact for savings is the need for short-term may be the purchase of large, durable goods such as cars, appliances for the home, etc. Savings for long-term needs may be for the purchase of a home, college education for the children, retirement funding needs as well as many other purposes.

According to research performed by Jack Caporal of The Motley Fool, 40% of Americans are afraid they won’t be able to retire because of setbacks caused by the pandemic. One method of mitigating the impact of economic emergencies beyond your control is save more money. I know, this is simply said and difficult to accomplish.

To reach your goal of saving more for the future, you must be honest with yourself and know exactly where you are today. If you are saving 3% of your after-tax income and wish to be saving 10% of after-tax income, this is quite a large difference in your lifestyle. One of the best means of saving for the future is the pre-tax contributions to your employer’s retirement plan. If you don’t receive the money in hand, the likelihood that your lifestyle will not conflate to a higher level is remote. My mother’s old adage of, “Out of sight, out of mind,” bears out this truth about money.

Second, record and analyze every penny of after-tax dollars that you spend over a two-week period. Earnestly think about the future and how you might be able to limit your spending in areas that aren’t positive in your life such as smoking or tobacco use. By saving the money he would have spent on cigarettes, my older brother informed me that he had an additional $3,118 in his savings and, as a bonus, felt better about himself. If that isn’t a win-win situation, I don’t know that I could think of one!

Cash flow management is the foundation to financial success. All things spring from the flow of cash and assets in our lives. Live your life as you wish; however, if you want to live longer, quit worrying about the daily costs of life and truly enjoy your senior years, you must start today. One of the best actions to start saving and stay focused on the long-term perspectives you wish to achieve is to seek out a coach or someone that can give you honest advice for your best interest. A CERTIFIED FINANCIAL PLANNER™ professional can help you plan for the best outcomes in your life. What you do today is critical for your life. Your future depends on it.

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Basic Economics; Complex World

There have been times when the world around us seemed like it was always a sunny day and when it wasn’t rainbows appeared boldly in the sky. Recently, most Americans are feeling isolated and anxious because of factors beyond their control. The pandemic has forced us to abruptly change our lifestyle from one of hope to one of despair and desperation.

I have some good news and bad news. First, the good news is that the world is never bad in and of itself. Your interpretation of the world’s events causes you to perceive your current situation as bad. The bad news is that many of us lack the will, vision and desire to turn the current events into positive ones.

One of my favorite pastimes is watching people. I don’t mean watching them for purposes of finding humor but rather to understand why and how they may be feeling about life. Too often the hard times are written on their faces, hands and the gait of their walk. Life has a method of breaking people based on outcomes from poor decisions. 

A young mother and her very small daughter were in a convenience store recently while I was purchasing gasoline for my car. As I watched the little girl, of maybe three or four years of age, relentlessly asking her mother for some food to eat, the resounding decline of her mother rang loudly in my ears. She was told that they didn’t have any money for food. As I thought about this situation, I quickly decided to act by purchasing some food and drinks for the little girl. When I reached the counter to pay for the food and hand it to the little girl, I noticed the mother was ordering cigarettes and slowly found the money to pay the attendant.

This simple, yet excellent, example of economics popped into my mind. When faced with a decision that impacted them both – the buying of food to eat – the individual purchased something that only the mother could utilize for satiation. Addictions of all types are experienced, and holding captive, too many people in world. Poor choices with money cause even greater harm to the family unit when more wholesome choices were obvious.

After asking the mother if I could give the little girl the food and drinks, I saw a smile radiate on the little girl’s face like the noon-day sun! The two of them made their way out the door and a stranger came up to me and, with a haughty tone in his voice, said, “I wouldn’t have bought them food! Didn’t you see her buy the cigarettes?” I smiled and simply replied, “For me, it was only economics and kindness to buy the little girl some food. For her, it was the difference between going hungry and losing hope. You see, we live in a complex world that functions on simple, basic economics.”

The moral of this story is that each of us has limited means. What we choice to do with this resource can be an investment (buying a little girl food to help and provide hope) or simply an expense (cigarettes). The former pays dividends many times over. The latter causes greater pain when the goods are used up.

Before making spontaneous purchases for items, you may not have the means to buy, think about the type of use of your funds. Are you making an investment or simply spending money? The difference is enormous.

It takes producers and consumer to maintain an economy. Next week we will investigate the savings rate in the United States and provide you some strategies to help you become an exponential, economic saver.

Until next week, be a help to someone in need. Help change their life by applying this simple lesson in economics. You will be the one who receives the dividends of goodwill!

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Primed and Ready to Spend

For the past year-and-a-half, scientists raced to develop effective COVID-19 vaccines and governments and companies worked to make vaccines available. Today, seven vaccines are approved in 176 countries. More than 2 billion doses have been administered, and about 14 percent of the world’s population has been vaccinated. It’s a remarkable achievement.

While there is a lot of work left to do, the Centers for Disease Control offered new and more lenient guidance for fully-vaccinated people in May, and restrictions across the country are being lifted. The result has been a surge in social activities we used to take for granted. According to the latest Axios-Ipsos Coronavirus Index:

“…Americans’ reemergence is moving full steam ahead. A majority have dined in a restaurant or visited friends and relatives in the past week – and these numbers continue to climb each week…At the same time, Americans are reporting small improvements to their mental and emotional health.”

One unexpected side effect of the pandemic is Americans spent less and saved more than normal. As a result, credit card balances are lower and personal finances have improved.

You know what they say about money burning a hole in your pocket.

Americans are ready to spend some of their savings. While some remain reluctant to venture far from home, others are ready to travel. The 2021 Summer Travel Index showed:

  • 63% of survey participants planned to take a trip in the next three months
  • 74% planned to travel in the United States
  • 13% will travel abroad
  • 29% have weekend jaunts planned 
  • 28% will be traveling for 10 or more days

People who aren’t ready to travel are spending, too. Morning Consult asked Americans what they were excited about doing as the economy reopens and found that 46% were ‘very excited’ to return to a ‘normal’ routine. The list of activities includes eating at a restaurant, socializing, attending parties or weddings, going to the movies, visiting amusement parks or museums, and attending concerts and sporting events.

While having extra money inspires many people to splurge, it’s important to keep a level head. Spending has risen sharply during 2021. According to the Bureau of Economic Analysis, spending increased:

  • 20.6% in January
  • 14.7% in February
  • 27.7% in March
  • 14.9% in April

While the idea of ‘revenge spending’ may be appealing, very few household budgets can withstand sustained increases in spending without significant increases in income. So, as you break free from pandemic restrictions, it may help to keep some basic principles in mind:

  1. Decide which savings habits you’d like to keep. During the pandemic, Americans saved a lot of money. The average household saved about $245 by not going out to eat, $1,400 by not vacationing, and almost $5,700 by not making major purchases, according to the Covid-19 & Finances Survey. Consider whether and how much to continue saving.
  2. Be aware of how much you are spending. When people have extra money saved, it’s just fine to splurge on something fun, especially after a long stretch of missing out on traditional everyday activities. Decide the amount to spend and then track how much has been spent. 
  3. Eliminate things that are not needed. During the last year, many people prioritized spending differently. Optional expenses, like dry cleaning, house cleaning, commuting, and happy hours, were eliminated. In some cases, the result was an increase in savings. Review your financial priorities to see if they have changed. 

Many people experienced financial insecurity during the pandemic lockdown. As a result, emergency savings accounts and other types of saving have become more important. If your financial priorities have shifted, be sure to talk to a CERTIFIED FINANCIAL PLANNER™. Spending less and saving more may help you build wealth and improve financial security.

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Small Mistakes, Big Consequences

As humans, we make mistakes all the time. Some mistakes may relate to your career choice. Other mistakes may relate to the location of your home. However, some of us make, seemingly, small mistakes and don’t realize the impact the outcomes will bring to our lives.

Small mistake #1: Failing to save for retirement early in your career. When a person is 23 years of age, the future seems so distant. Their entire career is just launching from the starting gates of their recent college graduation and time is their friend. Fast forward twenty-five years and the person is looking at their future with a different lens. Kids, mortgage, car payments, and other living expenses caused by the choices made many years earlier has redirected their otherwise retirement savings to current expenses of life.

The obvious outcome is one that none of us wishes to realize – working until we are much older than we would prefer. By initiating your future savings at the beginning of your career, time and compounding of money will help you realize your financial goals later in life. Start with your employer’s plan and contribute at least the amount the company will match. For example, if your employer matches 5% of your salary then you should seek a goal of contributing 5% of your salary. The math is easy on this one. You will have doubled your contribution amount annually with the employer’s matching contribution. Let’s assume the markets treated you favorable and the investment in your employer’s plan grew by 8% for the year. Now, you can experience growth far beyond your 5% initial deferral from your salary. 

Small mistake #2: Failing to live within your means. A philosophy practiced in our retirement planning business is one of “pay yourself first” for our clients. You want to do things differently in your life than most of your friends – save first, spend second. What this means is that you will treat your retirement contributions as a priority before incurring and spending your earnings on current pleasures of life. Too often we experience clients that meet with us that have all the toys of the day but lack any liquid savings or future investments.

Maximize your probability for retirement success by implementing a budget and focus on “paying yourself first”. By taking a more realistic approach to your future, you will continue to enjoy life and enjoy it more abundantly when you retire. Of course, prudent investment selection and monitoring are critical during the accumulation phase of life. You may wish to seek the guidance of a Certified Financial Planner practitioner to initiate your plan and provide you annual feedback on your progress.

Small mistake #3: Allowing your credit card balance to remain unpaid after one month. This is something that too many of us fall victim to early in life and it is a difficult problem to solve if left unattended. Based on a survey performed by Nerdwallet in January, 2021, the average balance carried on a credit card is $7,149 and the U.S. household will pay interest charges of $1,155 on average for 2021. Further, the survey discovered 63% of the responses indicated that they feel their household finances have worsened from that of the previous year.

The best method of controlling the interest accruing on credit card balances is to remember the card is for emergency purposes only. Do not use a credit card for a purchase that can’t be paid in full with your current savings or income. To be obvious, the use of a credit card is a means to live outside your current means. 

To resolve this mistake, use a debit card that immediately withdraws the funds from your bank account. Another method of solving the credit card debt issue is to ask your credit card issuer to draft the full payment each month from your checking account. This is a critical step since you must be certain the funds are available for the payment each month.

Lastly, place your credit card in a small plastic bowl of water. Place the bowl in the freezer and leave it there for about 3 days. Remove the bowl and note the credit card is safely stored in a block of ice that requires thought and effort to free the card. I know this sounds silly, but it is effective for those people who are impulse buyers with their credit cards.

Don’t wait to improve your life by eliminating or resolving these three little mistakes from your life. Seek out a CERTIFIED FINANCIAL PLANNER™ professional to guide you in managing your cash flow to maximize your future savings. What have you got to lose? Worry, anxiety, stress, etc. See you on the golf course!

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The Cost of Cash

One of the most important areas of planning for a secure future is to be able to weather the storms of life without invading your long-term investments. When working with a new client, we always ask questions regarding their current monthly living needs. By monitoring and managing your basic living needs such as food, shelter, clothing, entertainment, gifts, etc., you can determine your cash needs on a monthly basis.

This is the first step to developing a cash management plan that will serve you well in life. Once you know the cash flow need for a typical month, it is critical that you expand the thought process to cover a period of 90 – 120 days. Should a catastrophic event affect your family you will be confident that you can sustain your lifestyle without negatively impacting your future by withdrawing retirement assets prematurely.

The process of cash management is a delicate one. There is such a state of having too much cash. Yes, you read the sentence correctly! When a portion of your overall net worth is in cash you are experiencing something negative in your overall financial picture – loss of purchasing power. One of the most critical costs of retaining cash is that you lose the opportunity for the investment (cash) to maintain or exceed inflation with growth. A prime example is a recent client who came to meet with us for retirement planning. When we spoke about his overall wealth, he was rather proud of the fact that he had accumulated what he thought would be sufficient assets to live the life he desired.

However, when we applied inflation and taxes to the overall asset structure he maintained currently, he was not so happy. When your investments are stressed with the actual costs of living, and we all know that inflation and taxation may be present during our lives, the overall balance of assets for your lifestyle is less than the amount you currently see in your bank account.

The key to creating and maintaining a successful cash management program is in the process you utilize for your total investment portfolio. Cash is important and should be maintained in your financial plan. To arrive at the appropriate amount of cash needs it is critical you analyze your spending for a period of a month that is typical of your life. Do not measure a month like November when you are buying more food for Thanksgiving or gifts for Christmas. Rather, choose a month without these extraordinary expenses and evaluate what you are truly using the cash to provide you.

Once you understand where your money is being utilized, you may wish to make some adjustments. Now multiply the amount of cash flow needed in the month you analyzed it and multiply it by 3 or 4. The result of this calculation is the amount of cash you should maintain in a checking or savings account. If it sounds like you are losing money on these funds by not investing them in something that will meet or exceed inflation, you are correct. However, the real purpose of these funds is to provide you confidence and security if, or should I say “when”, a disaster was to strike your family.

Review your cash balance account every month and make certain you return it to your target amount. This is your security blanket. It is a good practice to analyze your spending at least one month per month to determine if you need to adjust your cash balance account for possible changes in life such as added prescriptions, increases in insurance needs, etc.

It is critical you plan properly for the future while sustaining your lifestyle today. If you don’t feel secure about your future, it is time to seek help. Contact a CERTIFIED FINANCIAL PLANNER™ professional to assist you in creating and maintaining a plan for your future. I’ll see you on the golf course!

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Predict Your Future By Creating It

Many of you will read the title of this article and wonder what it means. President Abraham Lincoln once said, “The best way to predict the future is to create it.” One of the roles I relish, when working with our clients, is the ability to help people reach their goals in life. Often clients will look at me during the planning process and possess only two items of information: 1) where she currently resides financially; and 2) where she wishes to be at retirement. The chasm between these two points of life may seem bottomless and unreachable. Before you shake your head that you agree with the previous statement, let me share a proven method of predicting your future.

First, you must clearly define your desires for your future. It is often said that “no archer can hit a target that doesn’t exist.” The process of future design begins with your imagination. Do you wish to relocate in retirement? Do you dream of a second career? What about your volunteerism you wish to enhance during retirement? Will you need specialty medical assistance and support in retirement? What type of home do you wish to reside in retirement? There are many considerations and you should list all of them that you wish. There are no wrong answers! 

A plain piece of paper and your favorite writing instrument will open your mind to the world you want to develop. Once the list is completed, for now, you should breathe a sigh of relief. You have now performed more planning for your future than most people. More time is spent by individuals planning their vacation than planning their future!

Second, you should evaluate your current financial statement. What have you saved for the future? Do you possess an emergency fund? One of the quantitative misunderstandings by most people is that your life in retirement will cost you less than your current lifestyle when working. This is not necessarily true. Think about it. Your medical costs may rise due to age or you may locate where you wish to spend most of your day in your hobby. These types of activities require funds and it is a fact that most retired individuals will continue to require 90% – 95% of their currently living expense in retirement.

When planning for our clients’ future, we assume the same lifestyle in retirement as experienced in their career. Why? It is better to assume more income is required and save more than enough for a lifetime than to be deficient. No one wants to simply exist in their retirement. Therefore, it is critical that a projection assuming taxes, cost of living increases, medical needs, housing costs, etc. be developed into your plan for the future. Success in retirement depends on the ability to weather any financial storm that may arise.

Lastly, you must bridge the chasm with an active savings plan that allows you to maximize growth for the future. Time is your friend when investing. Start early and be consistent in the savings process. If you are starting a little later than intended to save for retirement, there is hope for you. With a proper review of your current circumstances, you can make strategic changes in your savings plan that will give you the most probable opportunity for success. As retirement planning specialists, we have witnessed the fear people experience when the vision for the future is not clear. 

Seek out a complimentary consultation to see if you qualify for a “second opinion” of your plan for retirement. If you don’t have a plan, lets get one started. Live for today but plan for your future. Might as well, that’s where you will be spending your time in retirement. See you on the walking trail!

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The Habit of Saving

One of the most difficult habits to instill is saving. In this time we are living, too many of us want to experience a lifestyle that our current income cannot maintain while saving for our future. Before we realize it, our future is the present and we are in a bind. Forced working past the age of retirement that you would have desired to initiate your travel plans and other activities will not make you happy.

While reflecting on my younger days, I remember a couple of lessons learned about saving for the future. My goals were not lofty as a child except for the area of sports equipment. With limited means, my siblings and I purchased our own sports equipment if we wanted something beyond my parents’ budgeted funds for sports. This is where my saving habit came into existence. One of the most important lessons you can learn early in life is the habit of saving. Every child should be taught this valuable habit before graduating grade school. 

During my childhood, I saved depending upon the item needed in life. For example, I needed a new baseball glove because George Brett of the Kansas City Royals said so and he was a Hall of Fame Player. (Well it wasn’t only that fact but I also liked the Wilson A2000 glove and how it looked on my left hand.). My parents took me to the sporting goods store and we looked at the gloves. There it was on the rack in front of me – the baseball equipment that would make me a Golden Glove Award winner! 

I was smiling ear-to-ear until the salesman told me the price of the glove, $125. Ouch! I had saved $35 and thought it would get me a glove used by the great third baseman, George Brett. Lesson #1: The investment required for worthwhile items may cost more than you originally thought.

So, I went to work saving the remaining funds needed to buy the glove. To insure that the glove would not be sold when I returned, the salesman placed the glove in layaway for me. For the next several weeks, I would bring a payment to the store to be applied to the glove. After six weeks, I was in the store and smiling with a Cheshire Cat grin. I could take my glove home today!

This is where I learned my Lesson #2: Things don’t make you a better ball player, practice does. My new glove was my pride and joy. My abilities to play 3rd base did not immediately improve and I will a little disappointed with myself. 

The moral of this story is that you may want to examine why you want something and allow time to pass before you buy on an impulse. Saving for your future should be a habit that we develop early in life. You will find that you are less stressed in life, prepared for inconvenient hardships that arise and are more prepared to take advantage of future opportunities. The great investor, Warren Buffett, began his savings habit while a little boy. This habit helped him become one of the wealthiest people in the world. I am not saying we will all be as rich as Warren Buffett but I am saying you may enjoy a pretty good lifestyle.

If you need help finding a strategy for saving that creates your bigger future, seek out a CERTIFIED FINANCIAL PLANNER professional. This is one habit that will serve you well in life. See you on the golf course!

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The One Secret to Retiring Successfully

We are asked many questions about the strategies to retirement and enjoyment of life. This article will reveal the secret success criteria that many of our clients have implemented over the past 20 years to change their lives. Let’s think about the word “retirement” for a moment. Too often the word has negative connotations to individuals who are ill prepared for the next phase of life. Others see the word as an opportunity to begin a new hobby, career or volunteer service life. What is your understanding of the word “retirement”?

Most of our challenges in life give us opportunities to exercise our philosophy toward the pending decision. There are many inclinations to a decision and the result you choose may have life-altering consequences. Wouldn’t you want to tip the scales of success in your favor on this type of decision? Of course! If you were to find a method of decision-making that supported greater probabilities of success, you would use that method for all decisions.

Sadly, immediate wisdom is not bestowed on us humans. No, we learn by the old-fashioned method of trial and error. However, if you were to seek out someone to assist in your resolution process that had experience and specialized training in the area of retirement planning, you could attribute that person’s wisdom as your own.

The one secret to retiring successfully is to change your philosophy of life. I know this sounds like an indomitable task, but it does not have to be. For example, there are, at least, two options for every decision in life – positive and negative. You could think like some people that hate to pay income taxes. However, when I frame it in the context of what their income had brought them in terms of life, family, charity and other aspects of their choosing, they quickly see the difference in philosophy I hold toward paying taxes. Am I saying you should throw a party because you pay a significant amount of taxes to the government? Sure, if you want. Hey, this is America! Do what you wish with you own time, talent and treasure.

Your philosophy toward investing for your future requires that you look through the lenses of potential and desire. Do not retire to simply quit working. This philosophy will produce poor long-term results. Instead think of the contributions you could make to your community, church or other civic groups that require your expertise to continue supporting constituents. 

We use the term “reFIREment” to describe the next phase of your life. To us this is a new beginning with excitement and vigor. By changing your philosophy toward retirement, you will find yourself changing your investment philosophy. Think about the joys and/or challenges you wish to, or may, experience after your career. If you desire to travel, relocate to another state, start another career – all have funding needs that must be addressed during your work life. By defining your ultimate purpose in life, through a sound philosophy, you will be empowered to fund your retirement in a manner that allows you to accomplish a more rewarding life. Your outlook for the future will be much brighter and more positive when you have a plan that focuses on something other than “not working”.

Seek out help if you are unclear on how to define your future in monetary or philosophical terms that give you the greatest opportunity for success. A retirement specialist can serve many roles for your family. The best resources you will receive from a Certified Financial Planner™ professional are independent, tailored planning and honest feedback on the best approaches to reach your goals. You have far more to contribute to the world. Do not stop giving just because your work life has converted to your beach life. See you on the golf course!

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Retirement Planning and Tree Planting: Common Traits

An ancient Chinese proverb states, “The best time to plant a tree was 20 years ago. The second best time is now.” What do tree planting and retirement planning have in common? Both reward you by starting early and expecting the harvest much later in your future.

One of the “seeds” we plant in the lives of younger professionals is that the future arrives much sooner than most anticipate. I don’t mean that time speeds up but rather that life has a way of causing you to focus on many other tasks that will rob you of your future savings goals. For example, when you were graduating high school and received all of those beautiful congratulatory cards filled with checks and cash, you thought the future was so distant that you were immortal. 

However, in just a short period of time, you go to your mailbox and find the ornate envelopes addressed to you. Opening the envelope, you quickly realize it is a graduation announcement from a friend’s child! “How can this be?” you say out loud. Time has a way of moving consistently forward in our lives and, if we aren’t careful to notice, passes us by without our comprehending the importance of events and people around us.

What does this have to do with retirement, you ask? Everything! We provide financial planning and counseling services to younger professionals. When we inform them of the balance needed in their lives to meet all of their lifetime goals, they are quick to point out that the amount of funds allocated to their retirement seems excessive since they are so young. I love it when this statement is said so boldly by the young person! This recognition of time being so far away from their current reality allows us to demonstrate the difference between a little invested today and the required larger amount to invest if she starts 20 years later to save for retirement.

After the calculations and graphs are reviewed with the person, you can literally see the look in their eyes as to how fast time truly passes. The key to planting the money tree needed for retirement enjoyment is today. Too often people come to our office to discuss retirement planning and leave with less confidence in reaching their goals because of the lack of time to accumulate assets properly.

To help you start today, we have produced our “Top Ten Tips for Saving Today”:

Tip #1: Elect to participate in your employer’s retirement plan. Even if the amount is small, the plan will typically match a certain percentage of your contributions which will help you grow your funds more quickly.

Tip #2: Forgo the cup of latte, double shot, no foam every other day and place these funds in your savings. You will be surprised how much you can save in a year!

Tip #3: Pay yourself first. This is our mantra when clients ask us how to save for the future. You must take advantage of the tax laws to plan for all applicable deductions possible. Invest in your future, not the government.

Tip #4: Find an accountability partner. Saving is like exercise; you must perform both on a consistent basis to see the results. When I started exercising (again) regularly, I didn’t notice results for a month or so. Then the magic came alive one day when I was putting my suit pants on – they were too big! Your saving for the future will work the same way. Find someone to hold you accountable for exercising and saving.

Tip #5: Do what wealthy people do. Budget each year and consider your savings goal as the first disbursement for your monthly funds. The key difference between the behavior of wealthy people and ordinary people is their approach to saving for their future. Wealthy people will save their desired portion of income first and spend the rest. Ordinary people will pay their bills first then save what’s left.

Tip #6: Don’t stop investing your savings in difficult market cycles. Emotions rule a lot of people. However, to be successful in saving for the future, you must be consistent in your investing. Think about the process as if you were shopping. Look for bargains that have fundamental characteristics of a good investment. These are typically found when the markets are in recession or downturns. 

Tip #7: The stock market is an auction use it to your advantage. In its simplest terms, the stock market is based on someone selling something and someone else buying it. Don’t be confused with the technicalities of the market. Consider a well-balanced portfolio and consistently fund it through good and bad markets. You may find that you are well rewarded in the long run.

Tip #8: Rent don’t buy. Before you think you know what I am referring to allow me to explain further. Don’t buy assets that are low utilization but require significant investment of time and money. One primary example is a boat or recreational vehicle for most people. Besides maintenance, insurance, storage, taxes and other costs are borne with these assets that could be alleviated by renting one when you need it. Recently, we rented a house boat for a weekend on the lake. The gas tank was full and the maintenance, as well as all the required safety equipment, was completed by the leasing company. All we did was enjoy the weekend and turn the craft back in after we were through.

Tip #9: Invest your raise in salary. Instead of increasing your monthly living expenses by the same amount of funds you received in your recent raise, consider allocating the raise to your future savings. If you have been living comfortably, why should you change your lifestyle simply because you make more money?

Tip #10: Recite often the nine tips above so that you are not easily distracted by the “bright shiny objects” that appear before you while living your dream life. One word that I have used, on purpose, throughout this article is “consistently”. Without reviewing your actions periodically, it is easy to find yourself off course and in treacherous waters. 

Seek out a professional to help you establish a plan and work the plan like your life depends on it – because it truly does! See you on the golf course. 

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Time — Your Most Powerful Savings Weapon

The most powerful factor to assist in the planning for your future is time. However, time is also the one factor of investing that you can’t control. What do you do? 

To properly unleash the power of time in the calculation of compounding interest, you must start early to invest. You have more control over your future than you know. For example, if you saved only $100 each month from the time you graduate college at age 22 until you reach 30 and invest it prudently, say at an annual return of 6%, you would accumulate $12,344.27. Not quite ready to retire at age 30, right?

What happens when you continue saving each month but the amount is increased to $250 from age 30 until age 67, which is the age full retirement age for Social Security Benefits and assume the same annual rate of return? Of course, the amount in your savings account would be much higher if all assumptions were realized. How much would you realize in your savings account at age 67? You would have accumulated $522,896.95! Now, can you retire and live the life you choose? It depends. 

The key financial principles to learn from this illustration is that time and compounding of interest have helped you grow your account by $402,296.95 and you only invested $120,600. What if you had invested a little more each month, say $500 per month from the age of 30? You would realize a total of $932,763.11! To illustrate the power of these two financial principles, you have saved only $231,600 from your earnings and the account grew $701,163.11. 

What if we looked at this from another angle? Let’s assume that you enjoy coffee. Instead of the latte with extra espresso that costs $3.50 per day, you save this amount in your savings account each week for a total of and invest the funds to earn 6% annually. How much would you have accumulated in 45 years? $294,561.07! Now, that is a lot of coffee money.

The overall lesson to learn from these illustrative calculations is that you can save a significant amount of money for retirement if you start early in life. Time is the most powerful of element when growing money for the future. Of course, no one earns an exact 6% each year for forty-five consecutive years. However, the calculations provide you some motivation to start saving at the earliest point in your life. 

One of the best methods of accumulating money is to fund your employer retirement plan with as much as you can defer from your salary. Most plans feature a matching contribution from the employer, when coupled with your potential for growth, would help you reach your savings goals faster.

These simple concepts can work for you if you maintain discipline in the process. Too many people believe they have plenty of time to save for retirement and create a lifestyle that is too costly to allow them to save. Here is the trick to this process: do what wealthy people do. Save first and spend the rest! See you on the golf course.

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