Aug 31 2008

Where’s the Silver Spoon?

”Wealth after all is a relative thing since he that has little and wants less is richer than he that has much and wants more.” – Charles C. Colton

 

I have considered variations of this quote over the years and believe there is much truth in what it says.   Those of us that constantly strive for more and better will never be satisfied for very long and so it is probably a very good idea to find some other interests or projects in life.  If we can somehow convince ourselves that it is OK to settle for what we already have once in a while we might also realize there is more to life than money and material possessions…but then some of us never will!

 

On a related, but slightly different subject, I am about twenty years out from the traditional retirement age and at this point in my career, I am working to accumulate enough capital so that when I approach retirement age, I won’t be under a great deal of pressure to earn more money by working.  This is not to say that I want to stop working altogether, just that I don’t want to be a slave to the grind in my seventies.  There are certainly times when I would like to spend more of what I earn on new toys and extravagant vacations, but my retirement-age goal is simply more important. 

 

In order to reach this goal, I am doing what you would probably expect.  I max my contributions in my company’s 401(k) plan and I save what I can of my post-tax earnings.  I realize this is nothing revolutionary but it simply amazes me how many people do not take advantage of tax-sheltered savings plans.  I suspect many of those I am referring to imagine they will one day magically (or by inheritance) come into enough money to retire in comfort.  Others just never get their finances in order and falsely believe there will be time once the kids are out of college.

 

So times are tough and you don’t have enough money to pay your bills – let alone set any aside for retirement.  I know this is a legitimate problem for many right now and I also realize that some of you are strapped with adjustable rate mortgages that have turned your world upside down.  Please get some help because you truly need to get things under control and begin to put money away for the future…or you will likely never get out of the trap you are presently in.

 

Regardless of whether you are just starting your career or you have been working for years but spending everything you earn, start contributing at least 5% of your pre-tax salary to your company’s plan.  If your company does not offer a savings plan, then you should talk to an accountant or financial advisor and learn how to take advantage of an IRA in a similar fashion.  The toughest part is just getting started.  Next year, up your contribution to 6% and then 7% the following year – you get the idea!  In a future post, I will make some suggestions on how to allocate your contributions, but for now just get started – if you haven’t already!

 

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Aug 11 2008

So don’t call it a budget, just get your expenses under control!

Published by under Managing Money

 “Budget: A mathematical confirmation of your suspicions.” – A.A. Latimer

 

In case you haven’t noticed, the economy is somewhat dubious at the moment – unless maybe you live in the United Arab Emirates or a few other select places on the planet.  Clearly many people were caught off guard by the severity of the downturn, but it really shouldn’t be such a surprise.  Over the past 100 years or more, whenever money seems too easy, either to borrow or to make by speculating, rough times are on their way.  I’m the first to admit that I’m an amateur prognosticator, but I fully expected the good times to end much sooner than they did.  I would argue that in the U.S. we made it to the double bonus round before the levy broke.  So collectively we missed another opportunity to manage our greed and now many of us get to come off the mountain and enjoy the valley for a while.  Even the Wall Street crowd might feel the pain when their bonuses come in at half of what they were in 2007.

 

If you are able to appreciate the good that can come out of these tough times you will certainly be better off.  Like many others, including me, you might have been a little too caught up in the fever of the moment and possibly you lost sight of what should really be important in your life – like pancakes and bacon with your kids on Saturday morning or possibly a quiet evening at home alone with your significant other.  Money and its many trappings are appealing to most of us, but the quest for prosperity can easily overshadow the most meaningful experiences in life.  This is the perfect time to reset and focus on what you have to be grateful for.  If you have faith in God and recognize that all humans (with the possible exception of a handful of astronauts) have a rather parochial understanding of everything, you know that most of what we lose sleep over has no significance in the solar system – not to mention the universe.

 

Now maybe you are a little calmer about your situation, but unfortunately being philosophical isn’t going to help you get your finances in order – so get to work dealing with the situation at hand.  As a solid first step, sit down and dedicate adequate time making certain that your income covers your expenses on a regular basis.  If you have more money going out month after month than you have coming in, you must do something about it.  Don’t fool yourself into thinking that you can continue to spend as you wish.  Stop the bleeding even if it means giving up something you are particularly fond of.  We all get sloppy sometimes and spend more than we should.  I only hope you will make the proper adjustments before it is too late – assuming it isn’t already.  Take a look at what Liz Pulliam Weston has to say on MSN if you need further nudging (No free rides: This means you).

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