As we have come to realize a journey must be taken to achieve anything in life, including the long journey towards financial freedom. What is the freedom I am talking about or writing about to you today? Many of you must be thinking, I have plenty of freedom in my life at this moment. But in reality 70-85% of all Americans do not have the freedom to do as they please on any given day. From the time we are school aged to the time we hit retirement we are in some level of bondage. WOW did Rich Uncle EL just use the word bondage to describe how our modern society operates? Yes I did because after working in corporate America for over 10 years, I clearly have seen and read the facts facing the struggles of modern age society.
OK now I know most people in the financial news media, repeat and regurgitate the save 10% of all income all the time. But I say forget that; let’s do the best we can today. Let’s begin to save at least 20% of all income for life. Who wants to join the 20% savings club? Well if you’re asking and I’m telling, it means all of us should join the club. If you make 1,000 or 25,000 dollars a month it really doesn’t matter, let’s set aside 20% based off income for life. The strategy will be a bit different from the norm, as you will take 10% in pre-tax savings, like 401K accounts or Roth IRA’s, and the other 10% in after tax savings like a brokerage account. Who wants to join the 20% savings club? (Everybody Should)
On occasion I have to deal with unexpected expenses that throws off my budget. What can I say this is how life works and we either have to be ready or not to deal with the issues. How many times have you heard the phrase Murphy’s law, which references anything that can go wrong will go wrong. The emergencies or events almost always happen at inopportune times. Why do we have unexpected expenses? (No one knows but they sure stink)
Well this recently happened to me and it really makes it difficult to think optimistically. Challenging times are not easy but also completely help you realize a fire within you to push forward. The incident that made my heart skip a beat, was a major car accident. Another driver fell asleep and hit my parked car at 6 a.m. last Saturday morning.
New investors get some mixed messages from seasoned investors. On the one hand, you’ve got the old school rich folk saying “start investing today! You’ll have so much more time for it to pay off if you do it right now!”. On the other hand, you’ve got people saying, “Investment is about learning and mastery of certain theory. If you don’t know this stuff, it’s better to do nothing at all rather than risk losing money.”
I am neither a beginner nor a seasoned investor. So, I guess I lie somewhere in the middle. Sure, I understand that an investment made today (or better yet, 15 years ago) will have had a lot more time to develop and grow through compound interest. If you’re unfamiliar with compound interest, it’s an investment growing and then kicking off annual dividends. These dividends are then reinvested, used to buy up more stock (or whatever it is you’re invested in). This gives the investor a greater lump sum of investment with which to grow further value and, eventually, wealth. It’s basically a snowball effect, but with money.
I like to write posts based on my current experiences in life and this one happens to be a very unusual topic I rarely discuss here.(Haha) The topic today is retirement and we will dive in to share a bit about the sad state of retirement and what I mean by this.
The other day I had to take a half day off from work to go to a doctors appointment. I was done a bit early so I decided to go to the mall, primarily Marshall’s within the mall, to get a new pair of all-purpose athletic shorts for the summer. As I am walking through the hallway inside the local outlet mall, I see a row of chairs along the wall, each one filled with random people. Each and every person was just staring aimlessly at other people walking or either looking at a Cell Phone. The reason this struck me as being the sad state of retirement, almost 90% of the people looked depressed or just passing the time.
Let’s just imagine you actually had the opportunity to run personal finance ratios for your situation. If you handled your personal life like a business I’m sure things will run smoothly and efficiently compared to how you handled your dollars beforehand. A budget is for the most part in disarray before running the household finances within the personal finance ratios that matter.
When I say within I mean keep things in a preferred range for each ratio. Now a days some people think that paying for vacations which equals 30% of the yearly income is financially smart. I will tell you this person is not being financially aware of the personal finance ratios that matter. Because if they did, the vacation ratio which falls under entertainment and or vacation category should only be 15% of the annual income.
For a simple example let’s assume this person makes $3,000 dollars a month, net pay or about 50K monthly off annual income. (About the national Average)