“Money, Money, Money….” Regular folks are singing the ABBA tune at record numbers these days. And the lyrics are quite fitting for the times we are facing:
“I work all night, I work all day,
to pay the bills I have to pay
Ain’t it sad
And still there never seems to be
a single penny left for me
That’s too bad
In my dreams I have a plan
If I got me a wealthy man”
But forget the “wealthy man” part, ladies. All of us, women and men alike, need a wealthy plan! And we are never, never, too old to get started.
Working hard won’t get you there. A get-rich-quick scheme won’t get you there. Paying off all your debt won’t get you there.
So what exactly is a wealth plan? It is a plan that creates financial stability and security as it is defined by you. It is a plan that allows you to sleep at night knowing that your family is taken care of should something happen to you.
It’s rather simple if you chunk it down into bite size pieces:
- Establish an emergency fund. Did you know that only about 27% of American’s have $1,000 set aside? And another 27% only have between $1,000 and $5,000? Most people are living paycheck to paycheck and would be in a tough spot if they had a major car repair or their hot water heat broke.
- Pay off high interest and non-tax deductible debt such as credit cards, furniture loans, department store cards, personal loans, and the like).
- Max out your contributions to retirement plans, regardless of how much your company matches…and even if they don’t.
- With all of the above being accomplished, build your cash reserves – this is 12 months of your fixed expenses….non-discretionary items such as mortgage, insurance, utilities, etc.
- Invest in a highly diversified portfolio that aligns with your growth goals and tolerance for risk.
If you still have a need for college planning for your children, it should be woven in as well. Start a 529 plan as soon as possible!
Knowing how much you will need in retirement is important in setting your retirement goals. Many reports suggest you will need 60% – 80% of your last years salary. If you plan to be active and plan to travel, you may want to consider 100% – 125% as your target.
Paying off your mortgage is something you consider after you have completed all the objectives above. In the meantime, your mortgage is a valuable financial tool – use it wisely.
Just like a cross country road trip, you can’t get to where you want to go, without a map and a plan. Bottom line – write out a plan and get started!
Remember, “wherever you go, there you are.” Bukaroo Bonzai