This will be the first post in a multi-part series. In this post, we will be more generic, and the rest will be targeted to more specific ages.
Let’s start with a true story. One of my friends was a successful businessman. During the early to middle 2000s he made a substantial income. He was married with two daughters. With plenty of income and substantial retirement savings. His future looked great.
Around late 2007, the industry he worked in took a big hit and the company he worked for filed for bankruptcy. His oldest daughter was in college and his youngest daughter was about to start. He lost his job, and quickly found another, but at his new job, his income decreased by almost 80%.
He had done a great job saving for retirement, but a miserable job saving outside of it. With his cashflow from his previous job, it never occurred to him how vulnerable he was.
Fast forward a couple of years and this successful businessman had no more retirement savings because real life hit. He needed money. To make matters worse, he had to pay almost half of the money he withdrew to the IRS. Now, in his late 50s, he and his wife find themselves in a situation that they never dreamed. Dependent on their income to live with very little cushion for life, and almost nothing saved for retirement. Their daughters did graduate from college.
Where did they go wrong? Almost all of their money, other than their income, was in his retirement accounts. He had done exactly what he was told. What millions of Americans continue to do. When real life hit, having most of his money in retirement accounts became very expensive.
So, where should you start? You and your family! With so much stress put on saving for retirement, too many people focus on an event that they may never live to see. I am not saying that saving for retirement is not important.
Begin to accumulate as much cash as you can. Not only does this insulate you from emergencies, it opens up a world of opportunities. Not to mention it can save you thousands in interest that you will never need to borrow.
If you’re young, start now. If you are in your 30s or 40s, start now. Those of you in your 50s or older, start now. This is the beginning of financial freedom and insulation from life.
Youngsters, Part II will be directed at you but is applicable to all of us no matter what age.