by Rich Wesselt, Founder and Principal, Wesselt Capital Group
Originally published on LinkedIn
A startling statistic has emerged from news reports of the now-resolved government shutdown that left 800,000 federal workers without paychecks for 34 days: nearly 80 percent of Americans are living paycheck to paycheck. This statistic underlines how many Americans are unprepared financially, not only for unexpected circumstances but also for the future.
Behind this need for sound financial planning is the urgent need for savings discipline. Unfortunately, too much of current discussions around planning for retirement focus on what to do with your money once you have it, not on how to accumulate the money in the first place. And the key to accumulating financial security is saving.
I recommend families save 15 percent of their income per year. This is a principle I learned at my first job with a large life insurance company, and I have applied it to my own life personally, as well as to my business. When I started my business, I lived in a modest townhouse, drove the same car and had a very modest office for 15 years, all so I could save. This discipline, which I learned at a young age, has given my business and my family the financial security we have now. Saving 15 percent can be a challenge, but it is a goal worth striving for.
Why? Beyond even the extreme circumstances currently affecting government workers, there are many factors that may erode our income. Some are expected, such as inflation, taxes and the planned obsolescence of appliances. Other factors are unexpected such as auto repairs, a new roof on your house or a flood in the basement. And back in the 1990s, we didn’t expect to have the expenses we have today with smart phones and other technology.
If you are saving 15 percent and the unexpected happens, you will be ready. If you’re only saving 3 percent of your income, any of these factors can put a serious strain on your finances. Unfortunately, many people lean on credit cards in these situations, and end up piling up high-interest debt, which just makes saving more difficult.
But saving is not only about having an emergency fund, it is what we need to save for retirement. What are you doing today to take control of your financial future? Saving is a great start and a certified financial planner can help you meet your long-range goals.
The reality is most of us wish we had been better about saving money when we were younger. And because the best lessons come from experience, I’d like to pose this challenge:
Regardless of your age, if you could have given yourself advice 10 years ago about saving money, what would that be?
Please leave a comment over on LinkedIn and share your lessons learned. I’d like to hear from you, and I’m sure others would as well.