LIVING DEBT FREE AND TRULY WEALTHY NOVEMBER NEWSLETTER
4 Key’s To Saving Money!
Pay yourself first. Rather than the way we all do it, pay all the bills and then whatever is left we save, and there’s always nothing left. Before you pay any bills or anything cut yourself a check to put into savings. Although you may find it difficult at first, the key is to pay yourself first. It is a great way to get in the habit of saving. Before long, you will be very happy that you are saving and paying yourself first, not last.
Do it automatically. Pay yourself first automatically. It's easy to do electronically. Simply have a certain amount from your paycheck deposited into a financial account. You'll complete a form authorizing your bank (or whatever institution) to receive a portion of every paycheck and deposit it into your savings account. This is a great way to build up your savings—if you don't see the money, you won't miss it.
Save 10% of your paycheck. A good rule of thumb is to save 10% of your paycheck. If this feels too high, try 5% for a while. Then, try to work up to saving 10% of your earnings. You'll thank yourself over and over for doing it, once you've retired. Remember something is better than nothing.
The power of compound interest. Not all investing strategies are complicated. Perhaps the simplest strategy of all is to just leave it alone and let it accumulate over time, or "compound."
Thanks to the power of compounding, the more money you save, the faster it grows.
That's because you earn interest not only on what you save, but also on the interest generated. The earlier you start to save, the more dramatically your money can grow.
Example: Let's say you start out with $100 and it earns 5% compound interest. When your interest is compounded, the bank takes the interest that your account has earned during the previous day, week, month, or year. It adds that interest to your principal and then calculates your new interest payment. If you receive 5-percent compounded interest on a principal of $100, your investment would grow like this:
Year 1: $105.00
Year 2: $110.25
Year 3: $115.76
Year 4: $121.55
Year 5: $127.63
Those 4 ideas are the keys to having a successful retirement, for more information on how to implement or see if they fit it your budget, please contact our office today!
The Retirement Savings Myth
Most people think the most important thing when saving for retirement is how much money can they save. There is no doubt why, as logic implies that the more money you have the larger income you can take from it. However, this is not always true. Which is why the most important question is actually, “How much of my money can I spend?”! When diving into this question there are three main factors that affect how much money you can spend in retirement. They are taxes, leveraging growth, and unforeseen expenses.
The first factor that affects how much of your money you can spend is taxes. We are all familiar with taxes. Between being taxed on our incomes, capital gains, and property taxes, it seems there is never an end. The ugly truth is, without proper planning, these do not stop in retirement, and all of these taxes can significantly eat away at your income. However, if you could get your retirement income tax-free, legally and ethically, how much better off would you be? Would that be a direct increase in your spendable money?
The next factor is leveraging growth. How much income can your nest-egg generate? Will you only take an income from the interest? What happens if it doesn’t generate any interest that year or interest rates drop. Can you afford to take out the principle? Is your money at risk? If something happens and the market declines, could you survive on 20-50% (or more) less income? Are you willing to take that gamble? Additionally, are you being charged a fee to have your money managed? Fees and poor returns can cause you to lose a significant amount of funds. Will you be able to recoup these losses? Will your account last as long as you do? If you could eliminate the fees and guarantee your income would that give you peace of mind?
The last factor is unforeseen expenses. If an emergency comes up, how much money can you access to take care of the emergency. If you do, how will it affect your income? Will you have to keep dipping into your principle more and more?
Retirement is no simple matter. There are a lot of different things to consider when choosing how you save, and how to generate an income. The bottom line is that you need to have a well-formed plan. Give me a call today, so we can formulate your plan to have a “Worry Free Retirement”. Remember there is never any cost or obligation to meet with me.