WELCOME!

Why We Don’t Save, And How to Change That!

According to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2014, 47% of households indicate that they would have great difficulty handing an unexpected $400 expense.[1]

crossing-crossroad-businessman-fashion-medium

No one likes unexpected expenses. There are plenty of other things we could enjoy allocating that money towards. But this report points to an even bigger concern. If many households are unprepared for such a modest expense (compared to a $2,800 furnace-for example), where do we stand in our preparation for the future? All too often we do not consider the source of income that will provide the needs of our family ten, twenty, even thirty years from now.

There are many deterrents that can keep us from investing for our family’s future:

Time

Time is the deterrent that seems to be the most prominent. Many think, I don’t have spare time to try and learn about investing; there are more important matters that require my full attention. We also tend to focus on the financial concerns of today. There seems to be more than enough issues screaming for our attention today.

While the concern for present matters is important, we must not let the cares of today dominate our thoughts, attention, and our actions. Doing so keeps us in a reactive mode, tackling one current need after current need. We suppress thoughts of our future needs, telling ourselves we’ll address that when we finally have some free time.

For many of us, a decade will pass and we realize that we are not twenty anymore and knowing that no plan for saving and investing for the future has been implemented, we get frustrated and that frustration leads to further procrastination.

Money

Many believe they simply do not have the resources to start investing, or they view the amount they are able to invest as insignificant or not nearly enough to make an impact. Again, this can lead to putting off investing, with the thought that they will start investing when they are making more money.

As often happens, when someone’s income does increase, so do their expenses. They take on new or higher monthly bills.

Misconceptions

Some people have the misconception that the modest amount of money they are able to invest monthly, could not possibly accumulate into a large sum of money for the future. To even mention $500,000 or $1,000,000 seems unattainable to them.

Another broadly held misconception is that investing is an activity through which people lose a lot of money! It’s a dangerous game that only the Pros can play.

For whichever combination of the above perceived deterrents, the reality is, a substantial percentage of Americans will reach the age of 65 completely unprepared financially for retirement; this statistic is alarming.

According to Boomers and Retirement, a new survey by TD Ameritrade, the average Baby Boomer is about a half-million dollars short on retirement savings. And 74% of Boomers in the survey say they will have to rely heavily on Social Security during retirement.[2] And while $500,000 sounds like a lot, if it is your only source of income, it may only translate into approximately $2,200 a month (depending on how long you want your money to last.

The Solve

The global average annual household income is $1,200. If you earn $30,000 a year you are in the top 1% of income earners on the planet. The fact that you are reading this post, which has been delivered electronically and not by printed newspaper, indicates that you have the means to save for your financial future. It will take some work of course, some shifting of priorities, if your financial future is indeed important to you.

Most people, regardless of age, admit that they could be saving more. Some 70 percent said it would be possible for them to save an extra $25 a week by giving up minor pleasures such as take-out dinners, lottery tickets, snacks and expensive specialty coffees.[3]

That $100 a month, invested and earning market-rates of return, can work for you and accumulate nearly $500,000 over the average career span over 40 years. Just think of what $200 or $300 a month can do. Now, add the potential of an Employer match, (a 401(k), 403(b) or Simple IRA), and you can really get some momentum going for your retirement savings.

“The growth of your wealth, over time, comes from the stock market itself, not from a product, nor a financial guru or gimmick. Faithful, consistent contributions to a properly diversified investment portfolio can result in the accumulation of wealth needed to create a future income for you.”- Tim Rosen

Without question, the act of investing requires some wise counseling. It is worthy of the relatively small amount of time required, to gain some knowledge and direction. With increased knowledge and independent advice, you can increase your confidence so that you may have a successful investing experience. Seek a professional Adviser, not a financial salesperson, who has a good name- a respected reputation and track record of putting the Investor’s needs before his/her own.

 

[1] http://www.federalreserve.gov/econresdata/2014-report-economic-well-being-us-households-201505.pdf

[2] http://www.usatoday.com/story/money/columnist/brooks/2013/01/28/retire-debt-crisis-retirement-boomers/1840225/

[3] http://money.usnews.com/money/blogs/on-retirement/2015/06/08/how-to-boost-your-retirement-confidence

 

Follow Tim on Twiiter @timrosentv !