According to a recent Bankrate survey nearly a third (26%) of Americans have nothing saved for retirement. Zip. Zero. Nada en absoluto. A number that’s consistent with other surveys that came out earlier in the year. At the other end of the scale only about a third are saving enough. That statistic should be terrifying, even for people who have been thrifty savers all their lives. In an economy that relies on consumer spending, imagine taking a third of the population out of economic participation and you begin to understand the scale of the problem.
I see the results of those decisions first-hand here in Florida nearly every day; like noticing the change in a neighbor’s demeanor when the subject of homeowner’s insurance comes up. I’ve learned not to press the issue because it usually means that they don’t have insurance on their home. So far in Florida we’ve been fortunate; Hurricane Sandy just brushed the Florida coast on its way to blast New Jersey. That near miss kept our hurricane free streak intact since 2005, but it’s only a matter of time. In the two years prior to 2005, Florida was lashed by no fewer than eight hurricanes. The next “big one” that blows through this area is going to leave tens of thousands of retirees on fixed incomes homeless and destitute.
Form Saving Habits Early
Everyone is juggling a small universe of financial obligations and retirement is just one worthy cause of many competing for limited resources. For people in their 20s it’s easy to push retirement planning off to a comfortable future, particularly when struggling with the crushing weight of student loans and the insecurity of a job market that leaves workers devoid of anything resembling job security. Yet a 25 year old person who can scrape together as little as $5,000 a year can see that number swell to nearly $1.5 million by the time he or she reaches retirement age.
Opt Out of The Debt Economy
Debt is the triple trifecta whammy of personal finance; It creates an obligation you have to pay back out of future earnings, it adds interest expense to the cost of goods and it robs the borrower of the opportunity costs associated with investing that money somewhere that earns a return. Stop and ask yourself why Wall Street is so willing to loan people money. Do you think it’s because they think it’s good for the economy? If the recession of 2008 taught us anything is that Wall Street puts their own interests ahead of the economy 100 percent of the time. A billionaire hedge fund manager doesn’t care if the economy craters. The best way to hit back at those leeches is to simply not borrow money, for anything.
Kill The Bills
I hate Comcast with a passion because they’re either crooked or so incompetent it’s indistinguishable from malice; always finding some tricky way to increase our bill. That drives me crazy because these days to stay, even consumers have to constantly tame the small, recurring charges and bills that cling to your bank account like moss clinging to rocks in the Scottish countryside. The small corporate chisels are nearly unending and keeping your monthly expenses in line means constantly examining your expenses for ways to cut back or find a better deal. I totally understand it’s a pain and takes away from the precious amount of free time most of us enjoy in life but those little chisels add up to a lot of money.
Develop a Frugal Lifestyle
Too many people conflate “frugal” with “cheap” but the two concepts are nothing alike. Those who practice the frugal lifestyle are constantly looking for the best value for the dollar, not necessarily the cheapest alternative. Frugality is a lifestyle, not a hobby. It takes research, practice and spending time with a community of like-minded people. Spending for value rather than cost is the cornerstone of a successful financial life.
The good news in all this is it’s never too late to get started. Start with building up an emergency fund, then implement a debt snowball to start getting rid of the debt. Make sure you’re taking advantage of any employer match on your 401(k) and set a target amount to save for retirement every year. I won’t kid you, it’s hard at first. The great news is it gets easier as you go and, once it becomes a habit, your financial life will practically be on autopilot.