EXECUTIVE
$1,030, leaving you with $1,060.90. This continues
for the entire time you are invested. Let’s assume
that you saved $1,000 per year for ten years from
age 20-30 and stopped, allowing this to grow until
age 65. Your friend saved $1,000 per year for twenty
years, from age 45-65. Assuming a flat 6% annual
compounded return, you end up with nearly
three times more money than your friend. This is
represented in the illustration below. Compounding
is an amazing thing!
Which should I focus on first – retirement,
rainy day money, debt repayment, children’s
education?
While this question is best answered case by case,
but as a starting point we ask you to look at your
employer’s retirement plan. Is there a matching
component? Such as if you contribute 3% of your
salary they will match you 3% of you salary? If so,
great! Let’s start there. That 3% match is free money!
Be sure that you are contributing enough to take
full advantage of the match. 3% is only $3.00 for
every $100 you make. I promise, you won’t miss
it after a couple weeks. Never has anyone said to
me or anyone on my team, “I wish I hadn’t saved
so much for my retirement.”
Having rainy day money, or an emergency fund,
is one of the most rewarding things that you can
do for yourself. You never know when the washing
machine is going to go out or you have to replace
tires on your vehicle unexpectedly. As a general
rule you should have enough cash on hand to cover
three to six months’ worth of household expenses.
We start this by simply putting a few dollars away
at time using the methods above. The hardest part
is staying out of it! The next part, and the harder
part, is seeing the big picture and not giving in to
that new trendy outfit. It is easy to set a goal, but
no one else will hold you accountable.
“How am I ever going to pay for my child’s
college?” While having the goal of paying for your
child’s education is wonderful, you must be able
realize that you are not doing them a disservice
by planning for your retirement first. Let’s face
it; they don’t want you living in their basement
because you planned for their college and not your
retirement! We all want our kids to have it easier
than we had it, and that is wonderful if you can
comfortably make that happen. Just don’t sacrifice
your financial wellbeing to make it happen. There
are many ways to tackle the costs of college, so be
sure to seek advice when the time comes.
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