- Only the rich and wealthy need to financially plan. = Myth
- You personally need a lot of money to financially plan. = Myth
- You can financially plan even if you only own $5 = Truth
There are a lot of myths going around about financial planning, including the belief that only the very wealthy need to create a plan for their “tons” of money. Honestly, you only need to have cents available to plan out where those cents should be placed. We all may agree that we would like to plan with more than cents, but not having more does not mean you shouldn’t plan for what you have.
Planning for retirement is a financial goal that goes beyond just putting money aside. Planning for retirement also includes; being sure your credit scores are up, steering clear away from predatory lending, and making more sound financial purchases. All of these play an important role because the more you save in expenses, the more you have to put away for retirement.
I spoke with a lady one day who told me that she never saved for retirement because she was never taught how to. She also mentioned that she also didn’t believe she would make it to the age of retirement. Here she was, well past retirement and not financially planned at all. Because of her, I created an understanding called, “the 40 year working rule”. The details are as followed.
We all know that we are on our own timelines, and life happens. “Traditionally, society says that you are to go to school and graduate from high school at the age of 18. Then, “traditionally” you spend the next 4-6 years mastering what you would like to do with your life. With your degree(s) in hand after graduation from college, you start working in your field and you have roughly 40 working years left in you before you head to retirement. Forty years to save for later in life when your body gets too tired and cannot physically go out and get you any more money to survive.
By this time if you have not saved any money towards your IRAs, 401k, nor secured a pension with your work company, you could possibly end up with a social security check from the government for around $783 monthly. If you haven’t purchased a home in your 40 working years, you will have to pay rent out of that check… and utilities, food, entertainment, car note, car insurance, and possible more. Doesn’t seem like you’ll have enough right?
Many people of our elderly population are facing these difficult financial decisions today. So the next time you’re in line at the gas station and you’re annoyed that the short little old lady running lottery tickets is holding up the line, try to be kind, for all we know this is her chance to come up. For everyone else, it’s time to prepare to avoid those unfortunate circumstances.
If you have purchased and paid off a home in those 40 working years, rent does not have to come from your social security check. Because your home is a financial asset, it saves you money later in life. It’s also an asset that you can leave for your kids or generations to come, to start with and build up from. If you have invested in rental property, 401k plans, IRA plans, Annuities, Certificates of Deposits, Savings Bonds, Money Market Accounts, or other healthy financial products, you can avoid the struggle in your resting years all together.
Let’s talk. Have you ever found yourself up at 2am (when you probably should be sleeping) surfing the web or asking google odd things? Has any of those things ever been, “How much is Beyonce or Tom Hanks net worth?” Have you ever wondered if you have a net worth? And if so, how much are you worth financially? Join me Thursday, June 11th, 2020 for a live class as I review options for financial planning, as well as helping you discover your net worth.
Tamika Staten, Financial Education Coach