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A brief extract
Almost everybody I ever met started out in life expecting to retire in comfort. However, almost everybody I ever met also failed to plan for the day they would retire until the day was close. They lived a carefree life of dining out buying toys and cars and living on credit cards buying things they wanted today and paying tomorrow. When tomorrow came and they found themselves needing rather than wanting something, they had a problem; they had no ready cash in savings and their credit cards were maxed out. By repeating this pattern throughout their lives how could they ever be prepared for retirement?
Most people don’t give much thought to saving for the future! Planning for the future, especially in the area of finances, can be overwhelming and for some, even boring. There are a multitude of options, a host of “experts” and uncountable ways to screw things up. So, like many people they opt instead to postpone the decision. This is postponed for some inexact date in the future known as “someday.”
Someday: is a dangerous word because it provides an excuse to procrastinate and shelve important decisions that influence your future. Waiting for “someday” to arrive will not solve the problem; rather it will make it worse. The longer you wait, the worse it gets. I believe that after you read this book you will be able to plan for your retirement in less than an hour.
In addition to retirement, I also want to help you put money aside for other future plans; I want you to establish an emergency fund, build wealth and own your house outright; if that is your dream. But most importantly I want it to be easy, because I know that if I can make the intricate concept of planning for retirement easy you may be inclined to get started immediately rather than “someday”.
Seven Myths Debunked
1. I’ve waited too long and I’m too old to save for retirement. This is not true. While I agree it is better to start at 25 than when you are 50, it is also better starting at 50 than 60. The past is past and cannot be changed but it does no good to keep looking back. Instead look forward, as long as you’re still alive it’s not too late to start.
2. I’m too young to think about saving and planning for my retirement. Are you mad? If you’re under 30, you are at your prime! Younger people, no matter what their tax bracket is, have a fantastic opportunity to become very wealthy. Thanks to the power of compound interest, someone who invests $25,000 when they are 25, in a deposit account at 12% interest will have over $2 million when they turn 65 even if the person doesn’t add another dollar to the account. On the other hand, if a person waits until they are 30, they will need to deposit more than $75,000 to achieve the same result. Compound interest is the preeminent way to cultivate and grow money over the years, so get started while you are still young.
3. I don’t earn enough to save for my retirement. There is absolutely no reason you shouldn’t retire as a millionaire. Almost everyone, even those earning a minimum wage, have the opportunity to be a millionaire by the time they retire. I know it sounds too good to be true, but some simple math proves that it is true. If a 25 year old saves as little $23 per week they will retire with over one million dollars if the money is properly invested. So maybe you’re over 25, me too! But that’s okay, us older folk simply need to make appropriate adjustments. Betterment provides a great tool to help you calculate exactly how much you need to save based on your age and financial wants. You will find the calculator here.
4. Inflation will damage my retirement nest egg. This is myth is partially true. However, its truth is neither here nor there. It is true that $100 ten years from now will in all likelihood have less buying power than today, but the other side of that story is true too. Your $100 in ten years will be worth much more than someone else’s $0 invested. Solid investments are the sole way to beat inflation. It is far better to invest $100 than keep it in a bank or a tin can at home.
5. I prefer to spend my money on other things. When purposes are good, this justification often sounds like the most persuasive motivation to avoid saving for retirement. We oft times cling inconsiderately to money. We use what we have to purchase unessential trinkets such as new cars, the latest “must have” gadgets and the trappings of consumerism. Regularly we want to give beyond ourselves to charities, church, nonprofits and loved-ones in need. Supporting others is admirable, and I believe giving is good, so I want you contribute generously, but I’ve discovered that the best way to assist other people is helping yourself first. The greatest way to give generously is to have more to give. Advancing yourself first helps you activate your giving muscle. There’s a good reason why airlines advise you to “secure your own oxygen mask before helping others”. If it’s easier for you to breathe, it’s easier for you to help other people in need.
6. The stock market is risky and not safe. If that is what you believe, you do not comprehend the stock market. I don’t completely comprehend the stock market either, certainly not like a pro. I am not a financial consultant and I do not pretend to be one. The only people who really have an in depth knowledge of the stock market’s complexities are day traders, stock brokers and fund managers. Rather than putting aside several hours each day to learn about index funds, mutual funds and stocks, I chose to use a reputable investment broker who makes the decisions on investing for me. Whilst it is true that investment introduces risk, long-term investments in the stock market have proven to be the most effective and productive way to grow your money. Over the past 25 years, even including 2008’s steep decline and consequent recession, the market has delivered an average return of close to 11%. Putting your money in the stock market is the most stable investment one can make over the long-term.
7. I don’t have the spare time or know how to manage my long-term savings. You and I will probably never have as much knowledge as the experts and that is specifically why we must find tools developed by reputable experts. Though I’m generally a “do-it-myself” kind of person, I don’t do my own investment strategy. I did my investigation and found online tools that permit me to control my money. I have no desire to relentlessly analyze my investments by fine-tuning and countering out of fear every time the market changes, but I don’t want to drive blindfolded. So, rather than driving the bus myself, I put the best driver I could find in the driver’s seat.