$43,000 Bucks Is Not Enough!

For the last few years, I have been reading several early retirement and financial blogs for inspiration. As I have already passed the BIG 50 milestone, extreme early retirement is not really feasible at this point but I love the concept nonetheless.

The blogs I read are written by people who maximized their income, minimized their expenses and saved like crazy. They worked incredibly hard for a period of time and socked away their money so they could retire in their 30’s. Go Google “early retirement blogs” and spend some time reading for inspiration!

Unfortunately, I do not walk in their shoes!

Currently, my favorite website is Rockstar Finance as it shares the best money articles found on the web every day. I have always been fairly frugal and have saved my money but they take it to a level I didn’t even know was possible. I have learned so much from money bloggers and my personal favorite are the early posts from  Mr. Money Moustache, (start from the beginning).

I have found my own path and it works for me. I have found a way to maximize my income and minimize my expenses so that I can work a flexible schedule and still save for retirement. I will be extremely happy if I can pull this off until I can actually retire in another 10-15 years.

I was doing a little research on retirement statistics and this is what I found out. 38% of Americans do not save anything for retirement. The average savings of a 50-year-old is less than $43,000. The average net worth of a 55-64 year old is $45,447. All of these statistics (and plenty more) can be found at Statistic Brain.

38% of Americans save nothing, nada, zippo for retirement. That is a pretty scary thought.  I think Social Security will still be around in one form or another during my lifetime, but there is no guarantee.  Reporters often discuss that it will run out of money right around the time I should begin to collect.  If the average 50-year-old only has $43,000 saved after working 30 plus years, what will they manage to put away before the magical age of 65? That $43,000 bucks won’t get them too far!

Do you always feel like this?

I don’t know where most people learn to save, invest, budget and manage their money. When I was in school, I don’t recall it being taught or even discussed. I learned from Mother Fran and my Dad who were both frugal and money conscious. Mom kept a pretty tight budget in one of those black and white composition notebooks. They were awesome role models and managed to convey the importance of saving and investing money. I have written about it here!

I know plenty of people who are interested in saving money, who want to open a 401K or IRA but they never seem to get around to it. I think fear of the unknown gets in the way.   The stock market is confusing and the “so-called experts” who like to discuss it are often loud, brash and over the top. Personally, I think we are better off not listening to experts who feel the need to yell at the top of their lungs.

Last year, my niece asked for some advice about how to go about saving and investing money.  I don’t think I ever got around to answering her, so I am taking the opportunity to do so now! She just graduated from Law School this week and will soon be starting her career!

These are some suggestions for my niece!

Start saving NOW, today, like this very minute. In college you learned how to live on the cheap. Keep living this way and you will be on your way.

  • Get a roommate or 2 or 3 in order to keep your rent down.
  • Live close to work so you can take the bus, walk or ride your bike. When you factor in insurance, gas, the occasional fender bender into the cost of a car they are expensive.
  • Have regular pot luck dinners with friends instead of meeting for drinks every week. One drink turns into 2 (or 3) that turns into dinner and BAM you have dropped $50.00, even at an inexpensive restaurant. That is $200 per month or $2400 per year. I bet that would cover at least 2 monthly student loan payments!
  • Keep your thermostat set low and wear warm clothes all winter.
Dress Warm!
  • Never go shopping for fun. Let me repeat that! Never go shopping for fun. Never go shopping because you are bored. Never go shopping at all if you can help it. You don’t need more stuff. You need good relationships, amazing experiences but not stuff.
  • Don’t try to keep up with the Jones’, they are probably in debt up to their eyeballs.
  • Pay off your credit card bill every month. If you don’t think you will be able to – don’t use it.

Taking my advice on these matters will not increase the amount of money in your savings account by one penny unless you actually deposit the money you didn’t spend. Saving money is actually fun when you get the hang of it. It is also addictive in a good way.

If your job offers a 401K, sign up for it as soon as you are eligible. It seems really confusing when you start looking at all of the plans but you can do it. When I first started, I had no idea what I was doing. But I picked a plan and started contributing 6% of my income to my retirement. Looking back, I wish I had done more. At one point a few years ago, I upped my contribution to 20%. I told you, saving is fun.

If your job does not offer a 401K, pick an investment company and open an IRA. You can hem and haw about what company to use and whether to open a traditional or ROTH IRA. You can learn about compound interest, the stock market, bonds, REITS, CD’s and mutual funds.  Doing research is fine but at some point you have to stop researching, stop thinking and start taking ACTION.

Once your retirement accounts are set up, automate your deposits and take a look at them a couple of times per year. Watching money grow is way more fun than watching paint dry.

If you are still overwhelmed, go to Vanguard.com, click on “investing”, then click on “IRA’s”. Read what they have to say and pick one. Then contact them to set up one or more specific funds out of a gazillion funds that they offer.

Overwhelmed?

Toss some money in their VTSMX fund. According to Vanguards website “created in 1992, Vanguard Total Stock Market Index Fund is designed to provide investors with exposure to the entire U.S. equity market, including small-, mid-, and large-cap growth and value stocks. The fund’s key attributes are its low costs, broad diversification, and the potential for tax efficiency”.

Vanguard has a great reputation, a sound investment philosophy and low fees. I don’t get any kickback for giving a thumbs up to Vanguard. I just like and trust the company! All of my retirement money is with Vanguard as well as a non-retirement account.

Trust me, you don’t want to be one of those 50 year olds with less than $43,000 saved for retirement. That amount of money is nowhere near enough to live the wonderful life you deserve!

Lake Girl