It is far easier and quite possibly trendier to be a pessimist these days. The world is full of a certain sort of anxiousness about every aspect of accumulating money for another purpose. Aside from the obvious uses of our cash, such as protecting the roof over our heads, feeding the family and ensuring that they are safe, repurposing money for anything such as retirement, emergency accounts or college savings makes us wonder if the effort is worthwhile. We never used to be like this.
But bad economic spells, particularly those that last longer than we anticipated they would, can make doing anything constructive with our disposable cash doubly difficult. We run from risk. We second guess our intentions, plans and even motives. We project regret before we even make a move and this leaves many opportunities to languish untouched. Yet things aren’t really as bad as they seem.
Consider this: Roughly 25% of the population is having trouble with their employment. They are either unemployed, underemployed or underqualified. There are not enough enough jobs being created on a monthly basis to accommodate the workforce looking for work. But 75% of us don’t have too many problems. We are gainfully employed (not overworked but receiving enough hours and pay to get by) yet we feel as though that is tenuous situation at best. It probably is far more secure than you realize, if as my late father used to suggest to me, “you keep your nose clean”.
The truth about your job is simple. IF you do what you can to protect it, you probably are a lot safer than your realize. That 25% that isn’t working si not a problem for you, it is a problem for the whole of the economy, a rather large beast that lumbers these days rather than sprinting. But it isn’t going to have a huge impact on what you do.
So why do you treat your own personal economy as if you were in a recession? Why do you approach the whole concept of making your money work for you in the same way you would approach self-surgery? Let’s take a look at some of the things that are rbinging you down and why they really shouldn’t be too worrisome. For the sake of this article’s length, we’ll assume you are middle aged, between 30 and 50.
Retirement: if you aren’t doing it by now, you should start. The stock market isn’t going away and neither is the bond market. But for those of us still somewhat unable to trust the financial professionals that make this market do what it does, buying into it with mutual funds is still the best way to go. Now there are sorts of folks out there who feel as though bonds should be part of a portfolio no matter what age. And when you can actually see the possibility of retirement, then bonds and bond funds will play a role in protecting your assets. But folks tend to buy the car first and then build the garage.
Social Security: As one gentleman pointed out recently, it will be there. It always has been and probably always will. It will spare us from poverty in old age and has been doing exactly as it has promised since its inception. Fearing the future too far off, like 27 years from now doesn’t mean you shouldn’t plan for some cuts to keep the program solvent. You should. But planning as if it will simply not be there is creating a scenario much larger than you need.
Housing: It may seem really bad in asome parts of the country and in many parts it is, but the “bad” is usually due to previously higher-than-realistic expectations concerning value and worth. We calculated the overall value of our homes into our overall net worth. If we thought about our ownership as stewardship, sort of like temporary caretakers and our reward for maintaining the home for the next user, and there will probably be one after you, as a dividend rather than profit at sales, we might be less inclined to be upset about the value. If you are able to keep it in good shape, satisfy the lender’s requirements, and pay the needed insurances, what your house might sell for really isn’t an issue unless you are intending to sell it. It is little more than a parlor game.
Family: We have kids. We want to give them what we never had and do for them better than our parents did for us. And we feel very bad if we can’t. But we shouldn’t. We should be forever known as the selfish generation and our kids will thanks us for being so when they are our age – which will make us our parent’s age now. We need to focus on our futures because, if we don’t, we will be a much larger part of our kid’s futures than they would want or like us to be. If you are torn between college saving and retirement investing, choose the retirement. And tell them why. This is a very visual generation and they can easily visualize what a future might look like where mom and dad are moving in with them. Tell them early enough to allow them to overachieve, get grants and scholarships and be prudent about their own student loans.
We also have parents. And we are a visual generation projecting what might happen to our best laid plans if our parents move in with us. You need to find out where they are financially and get them to understand their options – and yours – before it become too late to do anything about it.
Saving and Investing: Emergencies happen to some of us. Sometimes, it never happens. The need for an emergency account is still important even if it takes a long time to build it. For the average person, a six month emergency account can take two to four years to build. It is still worth doing. Now this type of account building is called savings – because it is put somewhere with very little risk once the money is accumulated. Investing happens in your retirement accounts. No matter how much money you make, or how little. investing 5% will not change your take-home pay. Ten percent will and it should be your goal to get there in five years once you begin. By the time you reach fifty, you should be maxing the account out. This is sort of a self-tax that can be financed with raises and bonuses, clever and practical budgeting, and a cohesive plan to do what you can do.
The bottom line: You are probably more financially secure than you might have imagined.
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