It’s a common mindset, and it keeps many from reaching their financial goals. But the truth is, you don’t have to be born into money or have some special talent to create wealth. It all comes down to making a commitment to start building your fortune today.
So why do so many people put off working to create wealth until later in life? There are many reasons, but chief among them is fear.
What if you save your money in the wrong place and lose everything?
What if you can’t access money when you need it?
What if you confirm a deep-seated suspicion that you don’t really know what you’re doing?
But here’s the truth—you’re better positioned to start building wealth today than you ever will be again. That’s because your money has more time to grow and compound today than it will in the future.
That’s especially true in your 20’s and 30’s. But it’s also true if you’re 45 or 55. The best time to build wealth is right now, this very moment.
So what can you do? How can you leverage time to start building wealth? Here are a few simple financial concepts you can use right away.
Create an emergency fund. I know it seems counterintuitive, especially if your credit is in shambles or you have a lot of debt to pay off. But the truth is, building an emergency fund is one of the best ways to begin building wealth because it gives you a margin of safety. If you have money set aside for a rainy day, you won’t have to turn to credit cards or high interest loans when life throws you a curveball. Instead, you can take care of things with your own savings and move on.
Automate saving right now. The best way to start building wealth is to put something away every month. Forget about how much you’re putting away or your interest rate. For now, just put something away, even if it’s just $5. You can work with a financial professional to boost those numbers later on. The important thing is to start now.
If you want to learn more about how to start building wealth today, let’s chat. I’d love to help you set some goals and create a plan for getting there. We all deserve financial security, regardless of our age or income level. So let’s find out how you can get started today.
Whether you’re in your 20’s and paying off student loans or in your 40’s and trying to save for retirement, financial decisions can be complicated.
The good news? There are steps you can take to avoid mistakes and help your peace of mind when it comes to money management. Here are some of the most common financial blunders people make, and tips on how to avoid them.
Caring too much about what others think. This may be the tough love you need to hear. No one judges what you drive. Or the watch on your wrist. Or the size of your home. And the one-in-a-million person who does? They’re probably someone with WAY bigger problems than your 2006 economy car that still gets great gas mileage.
But that fear is powerful for a reason. It’s been carefully nurtured by TV commercials and Instagram accounts with a singular goal—to make you buy things you don’t really need.
Know this—you’ll gain far more respect by attending to your own financial situation than by desperately trying to keep up appearances.
Not asking for help when you need it. Let’s face it—mastering your finances is symbolic of becoming an adult. You’re supposed to know how to run a budget, save for retirement, and somehow have enough left over for a nice summer vacation. There’s tremendous internal pressure to act like you know what you’re doing.
But were you ever taught how money works? Did any teacher, professor, or mentor sit you down and explain the Rule of 72, the Power of Compound Interest, or the Time Value of Money? If you’re like most, the answer is no. It’s a cruel double-bind—to feel good about yourself, you must master skills no one has ever taught you.
This keeps you from asking for help. You get caught in shame, denial, and confusion. It’s hard to admit that you don’t know something that seems so basic, so essential.
But rest assured—you’re not the only one. And the right mentor or financial professional will listen to your story without judgment and seek to help you.
Procrastination. There are few things more daunting than staring at a pile of bills, an empty bank account, or an intimidating stack of paperwork. You know what you have to do. But it doesn’t happen because you’re so overwhelmed by the task ahead. And it’s especially daunting if you’ve never been taught how money works—you don’t even know where to start!
But nothing causes financial pain quite like procrastination. That’s because it causes exponential damage. Your bills pile up. Your interest rates rise. Your savings fall drastically behind, and you must save far more to catch up.
The antidote? Break tasks down into smaller, manageable steps. Maybe that means signing up for an online budget app or working with a financial professional. It might mean automating $15 per month into an emergency fund, or cooking one dinner at home each week.
It doesn’t matter how small the task is, as long as it helps put money back in your pocket and stops the scourge of procrastination.
In conclusion, making financial mistakes is something that can happen to anyone. By knowing some of the most common financial mistakes people make and what you can do to avoid them, you’ll probably have more peace of mind when it comes to money management.
If you want to maintain a budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
What is a budget?
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Maintaining a budget keeps you aware of when you are spending too much or if there are areas where your money could be saved.
It can also help you understand your spending habits as well as identify problems, such as giving in to too many sales or buying expensive lattes every day. With a clear understanding of how you spend money every month, you may be able to reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next summer vacation if you don’t know how much money you’re spending now.
How to create your budget
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. What is your salary—after taxes and any other contributions you make, like to a 401(k)? Is your employer cutting back your hours? Do you have another source of income such as a side job or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Then make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Leverage your budget
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money right out of the gate.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, dog walking, delivering pizzas, etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out every day for lunch!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends like playing tennis or frisbee in the park, rather than going to the club every evening. Your community is bound to have some free local events going on, especially in warmer weather.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses—or both! With this knowledge, you’ll be able to save more and plan for the future.
Policies may have standardized language, but each insurance policy should be tailored to your needs as they are today.
A lot can change in a short amount of time. An annual insurance review is a good habit to develop to help ensure your coverage still addresses your needs.
Life changes, and then changes again, and again. There are some obvious reasons to review your life insurance coverage, like if you’re getting married or having a baby – but there are also some less obvious reasons that may change your coverage requirements, like changing jobs or experiencing a significant change in income.
Here are some of the reasons you might consider adjusting your coverage:
Depending on what has changed, it may be time to increase your coverage, supplement coverage with another policy, change to a different type of policy, or begin to move some money into savings or update your retirement strategy.
Have you updated your beneficiaries? Did you get married or divorced? Did you start a family? It’s time to update your beneficiaries. Life can change quickly. One thing that can happen is that policyholders may forget to update the beneficiaries for their policies. A beneficiary is the person or persons who will receive the death benefit from your life insurance policy. If there is a life insurance claim, the insurance company must follow the instructions you give when you assign beneficiaries – even if your intent may have been that someone else should be the beneficiary now. Fortunately, this can be remedied.
How long has it been since you first set up a policy? How long has it been since your last insurance review? What has changed in your life since the last time you reviewed your policies?
Your insurance needs have probably changed as well, so now is the time to make sure you have the coverage you need.
In some cases, the warnings might have been heeded but in other cases, we may have learned the cost of credit the hard way.
Using credit isn’t necessarily a bad thing, but it may be a costly thing – and sometimes even a risky thing. The interest from credit card balances can be like a ball and chain that might never seem to go away. And your financial strategy for the future may seem like a distant horizon that’s always out of reach.
It is possible to live without credit cards if you choose to do so, but it can take discipline if you’ve developed the credit habit.
It’s budgeting time. Here’s some tough love. If you don’t have one already, you should hunker down and create a budget. In the beginning it doesn’t have to be complicated. First just try to determine how much you’re spending on food, utilities, transportation, and other essentials. Next, consider what you’re spending on the non-essentials – be honest with yourself!
In making a budget, you should become acutely aware of your spending habits and you’ll give yourself a chance to think about what your priorities really are. Is it really more important to spend $5-6 per day on coffee at the corner shop, or would you rather put that money towards some new clothes?
Try to set up a budget that has as strict allowances as you can handle for non-essential purchases until you can get your existing balances under control. Always keep in mind that an item you bought with credit “because it was on sale” might not end up being such a great deal if you have to pay interest on it for months (or even years).
Hide the plastic. Part of the reason we use credit cards is because they are right there in our wallets or automatically stored on our favorite shopping websites, making them easy to use. (That’s the point, right?) Fortunately, this is also easy to help fix. Put your credit cards away in a safe place at home and save them for a real emergency. Don’t save them on websites you use.
Don’t worry about actually canceling them or cutting them up. Unless there’s an annual fee for owning the card, canceling the card might not help you financially or help boost your credit score.¹
Pay down your credit card debt. When you’re working on your budget, decide how much extra money you can afford to pay toward your credit card balances. If you just pay the minimum payment, even small balances may not get paid off for years. Try to prioritize extra payments to help the balances go down and eventually get paid off.
Save for things you want to purchase. Make some room in your budget for some of the purchases you used to make with a credit card. If an item you’re eyeing costs $100, ask yourself if you can save $50 per month and purchase it in two months rather than immediately. Also, consider using the 30-day rule. If you see something you want – or even something you think you’ll need – wait 30 days. If the 30 days go by and you still need or want it, make sure it makes sense within your budget.
Save one card for occasional use. Having a solid credit history is important, so once your credit balances are under control, you may want to use one card in a disciplined way within your budget. In this case, you would just use the card for routine expenses that you are able to pay off in full at the end of the month.
Living without credit cards completely, or at least for the most part, is possible. Sticking to a budget, paying down debt, and having a solid savings strategy for the future will help make your discipline worth it!
¹ “How to repair your credit and improve your FICO® Scores,” myFico, https://www.myfico.com/credit-education/improve-your-credit-score
On one hand you may have some debt you’d like to knock out, or you might feel like you should divert the money into your emergency savings or retirement fund.
They’re both solid choices, but which is better? That depends largely on your interest rates.
High Interest Rate. The sooner you eliminate high interest rate debt, the better. Credit cards and personal loans can swiftly spiral out into crushing financial burdens. Even the highest income gets stretched thin if the interest rate is too high!
So if you fall into some extra cash and you’re faced with high interest debt, consider the peace of mind debt freedom would bring. It may be far more valuable than some zeros in a retirement account.
Low Interest Rate. On the other hand, sometimes interest rates are low enough to warrant building up an emergency savings fund instead of paying down existing debt. An example is if you have a long-term, fixed-rate loan, like a mortgage.
The idea is that money borrowed for emergencies, rather than non-emergencies, will be expensive, because emergency borrowing may have no collateral and probably very high interest rates (like payday loans or credit cards).
So it might be better to divert your new-found funds to a savings account, even if you aren’t reducing your interest burden, because the alternative during an emergency might mean paying 20%+ rather than 0% on your own money (or 3-5% if you consider the interest you pay on the current loan).
Raw Dollar Amounts. Relatively large loans might have low interest rates, but the actual total interest amount you’ll pay over time might be quite a sum. In that case, it might be better to gradually divert some of your bonus money to an emergency account while simultaneously starting to pay down debt to reduce your interest. A good rule of thumb is that if debt repayments comprise a big percentage of your income, pay down the debt, even if the interest rate is low.
The Best for You. While it’s always important to reduce debt as fast as possible to help achieve financial independence, it’s also important to have some money set aside for use in emergencies.
If you do receive an unexpected windfall, it will be worth it to take a little time to think about a strategy for how it can best be used for the maximum long term benefit for you and your family.
You haven’t spent that much money this month. There should be plenty left over to cover this, right?
Before long, the bank has sent you the alert—your account is in the red. You’ve overdrafted. Now you’ll almost certainly face two consequences…
1. Overdraft fees. The bank’s favorite way to slap you on the wrist for overspending. These are, on average, $33.58 per overdraft as of 2021.¹
2. Interest. The only reason you can keep purchasing once you’re in the negative is because the bank loans you money. And with every loan comes interest.
It may not seem significant, but these add up. In 2020, Americans spent 12.4 billion in fees alone.²
Here are some strategies to help your bank account stay above water…
Don’t activate overdraft coverage. This way, purchases that push your bank account past zero will be denied. Overdrafting becomes impossible. There are, however, two serious drawbacks…
You may feel silly if you try to make a purchase and it doesn’t go through. You may need to make a legitimate emergency purchase that exceeds the amount in your account.
Fortunately, there are other strategies at your disposal.
Link a savings account. If you have an emergency fund, you can link it directly to your spending account. That way, if you overdraft, your emergency fund will automatically make up the difference.
This works well for covering emergency expenses. But if your regular spending overdrafts your account, you may squander your emergency fund on non-emergencies.
Budget better. Consistent overdrafting may mean that you have a spending problem. If that’s the case, the time has come to cut back. Set up a budget that keeps your spending above water each month. That way, you won’t come close to the dangers of overdraft.
It all comes down to why you’re overdrafting. If you overdraft on occasion because of emergencies, simply link your emergency fund to cover the difference. But if it’s the symptom of a deeper issue, it may be time to seek help.
¹ “Overdraft fees hit another record high this year—here’s how to avoid them,” Alicia Adamczyk, CNBC, Oct 20, 2021, https://www.cnbc.com/2021/10/20/overdraft-fees-hit-another-record-highheres-how-to-avoid-them.html
² “Banks Charged Low-Income Americans Billions In Overdraft Fees In 2020,” Kelly Anne Smith, Forbes, Apr 21, 2021, https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/
There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.
More times than not it might seem like there’s more ‘month’ than ‘dollar.’ Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.
Although this situation might appear at first benign (i.e., it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.
Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?
If you have a goal in mind like buying a home in 10 years or retiring at 65, then you also need a realistic plan that will help you get there. Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!
The good news is that you have the power to spend less and start building wealth. That’s great, and you might want to do that… but how do you do that?
The secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.
That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle”. If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.
Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.
In an era of less social contact, debit cards are convenient. Just swipe and go. Even more so for their mobile phone equivalents: Apple Pay, Android Pay, and Samsung Pay. We like fast, we like easy, and we like a good sale.
But are we actually spending more by not using cash like we did in the good old days?
Studies say yes. We spend more when using plastic – and that’s true of both credit card spending and debit card spending.² Money is more easily spent with cards because you don’t “feel” it immediately. An extra $2 here, another $10 there… It adds up.
The phenomenon of reduced spending when paying with cash is a psychological “pain of payment.” Opening up your wallet at the register for a $20.00 purchase but only seeing a $10 bill in there – ouch! Maybe you’ll put back a couple of those $5 DVDs you just had to have 5 minutes ago.
When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.
Try an experiment for a week: pay only with cash. When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.
If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.
As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.
¹ “Debit Spending Is On The Rise, But Is It Here To Stay?” Visa Navigate, Apr 2021, https://navigate.visa.com/na/spending-insights/why-debit-spending-is-on-the-rise/
² “MIT study: Paying with credit cards activates your brain to create ‘purchase cravings’ for more spending,” Cory Stieg, CNBC, Mar 13, 2021, https://www.cnbc.com/2021/03/13/credit-cards-activate-brain-reward-network-create-cravings.html
You walk out of the office like a brand new person.
That’s because you’ve done it—you’re going to be earning a lot more money with that raise. The first thing that pops in your head? All the fancy new things you can afford.
Dates. Your apartment. Vacation. They’re all going to be better now that you’ve got that extra money coming in.
And to be fair, all of those things CAN get substantially fancier after your income increases.
But one thing may not change—you still might end up living paycheck to paycheck.
Why? Because your lifestyle became more extravagant as your income increased. Instead of using the boost in cash flow to build wealth, it all went to new toys.
This phenomenon is called “lifestyle inflation”. It’s why you might know people who earn plenty of money and have nice houses, but still seem to struggle with their finances. The greater the income, the higher the stress. As Biggie put it, “Mo’ Money, Mo’ Problems.”
The takeaway? The next time you get a raise, do nothing. Act like nothing has changed. Go celebrate at your favorite restaurant. Keep saving for your new treat. But you’ll thank yourself if you devote the lion’s share of your new income to either reducing debt or building wealth.
Rest assured, there will be plenty of time to enjoy the fruits of your labor in the future. But for now, keep your eyes on the most important prize—building wealth for you and your family’s future.
Well, unless you win the powerball or stumble upon buried treasure.
The simple fact is that retirement can last a long, long time and often be expensive. According to the Federal Reserve, the average American can expect a retirement of almost 20 years, requiring $1.2 million.¹
How long would it take you to save $1.2 million? Even if you could stash away your entire paycheck, it would likely take over a decade. Factor in the daily costs of living, and decades may become centuries.
Unless, of course, you leverage two simple strategies…
Strategy One: Maximize the power of compound interest.
Strategy Two: Start saving today.
These are time-proven strategies that anyone can leverage. And they can mean the difference between your savings running out of steam or lasting as long as you do.
Let’s start with strategy one: Maximize the power of compound interest…
Compound interest can supercharge your savings. Instead of taking centuries, you have the potential to reach your retirement goals just in time!
That’s because compounding unleashes a virtuous cycle. The money you save grows on its own over time.
But here’s where the magic happens—the more money you have compounding, the greater its growth potential becomes. Even a fraction of your paycheck can eventually compound into the wealth you may need for retirement.
Think of it like changing gears on a bike. Savings alone is first gear—good enough for going down hills or casual jaunts through the neighborhood.
But for reaching greater goals, you need more power. Compound interest is those extra gears—it’s an advantage that can radically improve your performance.
That leads straight into the next strategy: Start saving today.
The longer your money compounds, the greater potential it has for growth. To prove this, let’s crunch the numbers…
Let’s say you can save $500 per month. You find an account that compounds 10% annually.
After 20 years, you’ll have saved $120,000 and grown an additional $223,650 for a grand total of $343,650. Not bad!
But what if you wait another 11 years? Your money will more than triple—you’ll have $1,091,660!
The takeaway? A few years could be the difference between reaching your retirement goals and coming up short. The sooner you start, the greater potential you have to get where you want to go.
No more sporadic saving when you feel the panic. No more burying your head in the sand because you don’t know what the future holds. No more fear that your finances won’t cross the finish line.
These simple strategies can help you go the distance and retire with confidence. Contact me if you want to learn more about building wealth!
¹ “Retirement costs: Estimating what it costs to retire comfortably in every state,” Samuel Stebbins, USA Today, Feb 11, 2021, https://www.usatoday.com/story/money/2021/02/11/retirement-costs-comfortable-in-every-state-life-expectancy/115432956/
You know how it goes. The thought flashes through your mind—”I need to start saving money!”
And then… well, that’s it. You read a few articles on saving and try to spend less, but after a week or two your mind has moved on.
Why? Because all forms of positive change are energy intensive, at least at first. And your brain, smart as it is, likes conserving energy.
So to jump-start saving, you need to take several one time actions that are borderline thoughtless.
Enter automation. It’s a small step with massive return potential.
Like that, you’ve set the stage for dozens of wealth-building actions well into the future.
And what did it take? A few taps over a few minutes.
So what are you waiting for? Automate your savings right now. I’ll wait! Even if it’s $5 per month, it’s a step in the right direction—to build wealth for your future!
You know how it works. If your guess is the closest without going over, you win the prize. And whether it’s a cash pot, a season pass for your hometown’s team – or even just the jellybeans themselves, it’s a situation with a lot at stake. You’ve been presented with a ripe opportunity to prove your keen intellect, not to mention maybe winning some free candy!
You may start pulling out your old high school algebra equations. You may laboriously count the visible jellybeans so you can extrapolate the total. You may even pick the jar up and hold it to the light – shaking it and assessing any gaps in area coverage.
Take your time. It’s a big decision.
Unfortunately for many people, it seems not as much thought goes into estimating how much a life insurance policy may cost. Can you guess how much a policy might cost?
LIMRA’s 2021 Insurance Barometer study shed a little light on just how off these guesses can be: When Millennials surveyed were asked how much they thought a healthy 30-year-old would pay for a term insurance policy, their median guess was $1,000 – more than 6 times the actual cost!¹
That stat is pretty revealing: odds are that the number you have in mind is a lot higher than what you might actually end up paying for your policy. As a result, it may feel like you’re saving money right now by not having life insurance. But in the case of a sudden illness, the passing of a breadwinner, or an unexpected loss of income, not having (what is potentially affordable) protection for your loved ones feels as silly as writing down a guess of 1,000,000 jellybeans next to the mathematician’s answer of 1,086.
The bottom line: Have you overestimated how much a well-tailored life insurance policy could cost you? Not sure? Reconsider your guesstimate with a financial professional who knows the in’s and out’s of your needs and what coverage may be available that fits your budget. (It’s like knowing how many jellybeans are in the jar before you have to guess!)
¹ “Top Misconceptions About Life Insurance,” LIMRA, https://www.limra.com/siteassets/research/research-abstracts/2021/2021-insurance-barometer-study/2021_barometer-infographic.pdf.
Life insurance companies are more willing to offer lower premium life insurance policies to young, healthy people who will likely not need the death benefit payout of their policy for a while. (Keep in mind that exceptions for pre-existing medical conditions or certain careers exist – think “skydiving instructor”. But in many cases, the odds are more in your favor for lower premiums than you might guess.)
At this point you might be thinking, “Well, I am young and healthy, so why do I need to add another expense into my budget for something I might not need for a long time?”
Unlike a financial goal of saving up for a downpayment on your first house, waiting for “the right moment” to get life insurance – perhaps when you feel like you’re prepared enough – is less beneficial. A huge part of that is due to getting older. As your body ages, things can start to go wrong – unexpectedly and occasionally chronically. Ask any 35-year-old who just threw out their back for the first time and is now Googling every posture-perfecting stretch and cushy mattress to prevent it from happening again.
With age-related health issues in mind, remember that the premium you pay at 22 may be very different than the premium you’ll pay at 32. The reason is simple—most people physically peak by the time their 30.¹
If you’re feeling your mortality after reading those numbers, don’t worry! You’re probably not going to go to pieces like fine china hitting a cement floor on your 30th birthday. But there is one certainty as you age: your premium will rise an average of 8-10% on each birthday.² Combine that with an issue like the sudden chronic back problems from throwing your back out that one time (one time!), and your premium will likely reflect both the age increase and a pre-existing condition.
If you experience certain types of illness or injury prior to getting life insurance, it often goes in the books as a pre-existing condition, which will cause a premium to go up. Remember: the less likely a person is going to need their life insurance payout, the lower the premium will likely be. Possible scenarios like the recurrence of cancer or a sudden inability to work due to re-injury are red flags for insurance companies because it increases the likelihood that a policyholder will need their policy’s payout.
A person’s age, unique medical history, and financial goals will all factor into the process of finding the right coverage and determining the rate. So taking advantage of your youth and good health now without bringing an age-borne illness or injury to the table could be beneficial for your journey to financial independence.
¹ “A map of the ages when you peak at everything in life,” Digital Information World, March 16, 2021, https://www.digitalinformationworld.com/2021/03/a-map-of-ages-when-you-peak-at.html#
² “How Age Affects Life Insurance Rates,” Investopedia, June 29, 2021, https://bit.ly/2L7P0x6.
That’s because no single source of income or wealth is perfect. They’re all subject to ups and downs, highs and lows.
Think of it like going to the golf range and handing the caddie an armful of drivers. You’ll make powerful drives every time, but what happens when it’s time to putt? Even worse, how will you escape bunkers?
It’s a classic case of too much of a good thing. If you’re a serious player and plan to play for the long run, your golf bag needs a variety of clubs—a few different irons, wedges, and putters—to handle whatever challenges you’ll face during the game.
The same is true of building wealth.
It’s not a silver bullet. But diversification can offer a layer of protection against the ups and downs of the economy. It can also provide you with supplemental income during lean times.
So how can you start diversifying today? Here are two ideas…
Start a side hustle. This simple strategy can diversify your income sources. Regardless of what’s happening at your 9-to-5 job, you can count on your side hustle to help generate cash flow.
Meet with a financial professional. A licensed and qualified financial professional can help you implement diversification in your savings. This could make a huge difference in protecting your wealth from the ups and downs of a changing economy.
Contact me if you want to discover what this strategy would look like for you. We can review what you’ve saved thus far and check your opportunities for diversification.
But by definition, your job ceases to become your source of income once you retire.
Instead, you’ll need to tap into new forms of cash flow that, most likely, will need to be prepared beforehand.
Here are the most common sources of retirement income. Take note, because they could be critical to your retirement strategy.
Social Security. It’s simple—you pay into social security via your taxes, and you’re entitled to a monthly check from Uncle Sam once you retire. It’s no wonder why it’s the most commonly utilized source of retirement income.
Just know that social security alone may not afford you the retirement lifestyle you desire—the average monthly payment is only $1,543.¹ Fortunately, it’s far from your only option.
Retirement Saving Accounts. These types of accounts might be via your employer or you might have one independently. They are also popular options because they can benefit from the power of compound interest. The assumption is that when you retire, you’ll have grown enough wealth to live on for the rest of your life.
But they aren’t retirement silver bullets. They often are exposed to risk, meaning you can lose money as well as earn it. They also might be subject to different tax scenarios that aren’t necessarily favorable.
If you have a retirement savings account of any kind, meet with a licensed and qualified financial professional. They can evaluate how it fits into your overarching financial strategy.
Businesses and Real Estate. Although they are riskier and more complex, these assets can also be powerful retirement tools.
If you own a business or real estate, it’s possible that they can sustain the income generated by their revenue and rents, respectively, through retirement. Best of all, they may only require minimal upkeep on your part!
Again, starting a business and buying properties for income carry considerable risks. It’s wise to consult with a financial professional and find experienced mentorship before relying on them for retirement cash flow.
Part-time work. Like it or not, some people will have to find opportunities to sustain their lifestyle through retirement. It’s not an ideal solution, but it may be necessary, depending on your financial situation.
You may even discover that post-retirement work becomes an opportunity to pursue other hobbies, passions, or interests. Retirement can be about altering the way you live, not just having less to do.
You can’t prepare for retirement if you don’t know what to prepare for. And that means knowing and understanding your options for creating a sustainable retirement income. If unsure of how you’ll accomplish that feat, sit down with your financial professional. They can help you evaluate your position and create a realistic strategy that can truly prepare you for retirement.
This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.
¹ “How much Social Security will I get?” AARP, https://www.aarp.org/retirement/social-security/questions-answers/how-much-social-security-will-i-get.html
The typical household budget that covers the cost of raising a family, making loan payments, and saving for retirement usually doesn’t leave much room for extra spending on daydream items. However, occasionally families may come into an inheritance, you might receive a big bonus at work, or benefit from some other sort of windfall.
If you ever inherit a chunk of money (or large asset) or receive a large payout, it may be tempting to splurge on that red convertible you’ve been drooling over or book that dream trip to Hawaii you’ve always wanted to take. Unfortunately for many, though, newly-found money has the potential to disappear quickly with nothing to show for it, if you don’t have a strategy in place to handle it.
If you do receive some sort of large bonus – congratulations! But take a deep breath and consider these situations first – before you call your travel agent.
Taxes or Other Expenses. If you get a large sum of money unexpectedly, the first thing you might want to do is pull out your bucket list and see what you can check off first. But before you start spending, the reality is you’ll need to put aside some money for taxes. You may want to check with an expert – an accountant or financial advisor may have some ideas on how to reduce your liability as well.
If you suddenly own a new house or car as part of an inheritance, one thing that you may not have considered is how much it will cost to hang on to them. If you want to keep them, you’ll need to cover maintenance, insurance, and you may even need to fulfill loan payments if they aren’t paid off yet.
Pay Down Debt. If you have any debt, you’d have a hard time finding a better place to put your money once you’ve set aside some for taxes or other expenses that might be involved. It may be helpful to target debt in this order:
Fund Your Emergency Account. Before you buy that red convertible, put aside some money for a rainy day. This could be liquid funds – like a separate savings account.
Save for Retirement. Once the taxes are covered, you’ve paid down your debt, and funded your emergency account, now is the time to put some money away towards retirement. Work with your financial professional to help create the best strategy for you and your family.
Fund That College Fund. If you have kids and haven’t had a chance to save all you’d like towards their education, setting aside some money for this comes next. Again, your financial professional can recommend the best strategy for this scenario.
Treat Yourself. NOW you’re ready to go bury your toes in the sand and enjoy some new experiences! Maybe you and the family have always wanted to visit a themed resort park or vacation on a tropical island. If you’ve taken care of business responsibly with the items above and still have some cash left over – go ahead! Treat yourself!
There’s no way to guarantee that it’ll pay off because there are so many unknowns that go into starting a business. But one thing is for sure: If you’re the adventurous type and aren’t afraid to give it your all, you won’t be able to resist the urge to try!
So if you’re thinking about entrepreneurship, here are some factors to consider…
Do you have enough experience in your field?
It’s a fact—entrepreneurs with at least three years of experience in their industry are 85% more likely to succeed.¹ If you haven’t met that threshold, you might not be ready for entrepreneurship just yet! Are you equipped to handle the stress?
Entrepreneurship can be intense. You’re going to be the one who has to problem solve payroll, bookkeeping, marketing, sales, customer service…the list goes on and on.
If you aren’t ready for this kind of pressure, entrepreneurship might not be for you. It may be better to begin developing stress coping strategies now that could serve you well if you pursue entrepreneurship in the future.
Have you developed a professional and personal support network?
Starting your own business is tough. Having a support network can make it easier. Without a positive, supportive circle (in person and online), you run the risk of…
People you know who have already started businesses are great contacts for advice. And if they’re extremely successful, they may even be willing to mentor you as well.
It’s also critical to surround yourself with inspired individuals who can support you in your moments of self-doubt or when you’ve had a failure. These are the people that can help you keep going when things get tough!
Are your personal finances in order?
If you’re paying off massive amounts of debt, have no savings, and are living paycheck-to-paycheck (or worse…borrowing from friends or family), entrepreneurship would likely stress your finances even more. How would you pay your rent or put food on the table if your business underperformed? That’s why it’s best to discover how money works before—not after—you start your business.
This article isn’t meant to discourage you from going out on your own and forging your own business path—entrepreneurship is an incredible opportunity to chase your dreams and build wealth! Rather, it’s supposed to help you succeed. The sooner you start addressing the factors in this article, the sooner you can start building the business you’ve always wanted!
¹ “The Average Age Of A Successful Startup Founder Is 45,” Entrepreneur Middle East, George Hojeige, Feb 5, 2020, https://www.entrepreneur.com/article/345884
There’s a significant financial mistake people in their 20s and 30s make. It’s simple, but if you’re young, it could change your financial future…
Have you made this mistake? Think you know what it is?
Young people don’t save enough. Not by a long shot. On average, Millennials have only saved $23,000 for retirement.¹ And a recent survey revealed that 65% of 50 year olds felt the greatest financial mistake of their 20s and 30s was not saving.² It’s no wonder, then, that the same group feels they have under-saved and under-prepared for retirement.
So what can you do if you’re a young person seeking to build wealth? Here are three ideas…
Automate saving every month. The power of automation makes saving easy. Saving stops being a conscious decision with which you may or may not follow through. Instead, it’s a background process you can set and forget.
Meet with a financial professional. They’re the guides you need for navigating the world of budgeting, saving, and building wealth. They can help you identify the goals and strategies you need to inspire your savings.
Focus on your own financial growth. Comparing your lifestyle to your peers is tempting, especially when you’re young. But it can be dangerous, especially if it causes you to spend more than you earn. Just remember—you may not really know the financial situation of your friends as presented on social media. People tend to just show the good and not the bad. Orient yourself towards improving your own situation and building your future.
So don’t make the mistake that so many have made. Follow the tips in this article and start laying the foundation of your financial future.
¹ “Retirement Security Amid COVID-19: The Outlook of Three Generations 20th Annual Transamerica Retirement Survey of Workers,” Transamerica Center For Retirement Studies, May 2020, https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2020_sr_retirement_security_amid_covid-19.pdf
² “Money Mistakes: Exploring the financial situation of people over 50,” Caring Advisor, https://caringadvisor.com/money-mistakes/
There are a lot of reasons why. It takes planning and self-control. You’ll have to ask yourself if you can fit every purchase into your budget. It means giving up something today in order to benefit tomorrow.
These are all true, but saving doesn’t have to be hard work. One way to make it easier is to automate your savings and then watch your balance grow!
Automation is such a powerful tool because it makes saving effortless. With automation, saving is now a default, as opposed to a decision—you’re always saving in the background.
For example, you might have a goal to save $1,000 for a vacation. If you’re saving $20 per week, that would take less than a year. And the same logic applies to larger goals—it’s a key strategy for creating retirement wealth.
First, decide how much money you can afford to save each month. Then set up automatic deposits from your main bank account into your savings account. That’s it! Every month, money will go straight from your paycheck to your wealth building efforts.
Now, you’re positioned to go about your daily business, confident that you’re preparing for the future. And it only takes a few minutes to do! If you want to discover more wealth building strategies, contact me. We can review your financial situation and create a game plan.