Take these financial lessons to heart.
You have a chance to manage your money better than previous generations have. Some crucial financial steps may help you do just that.
Live below your means and refrain from living on margin. How much do you save per month? Generations ago, Americans routinely saved 10% or more of what they made, either depositing those savings or investing them. This kind of thriftiness is still found elsewhere in the world. Today, the average euro area household saves more than 12% of its earnings, and the current personal savings rate in Mexico is 20.6%.1
In 1975, the U.S. personal savings rate hit an all-time peak of 17.0%; it has been below 4% since June. Easy credit is one culprit; the tendency to overspend in a strong economy is another. Remember to pay yourself first, not credit card companies. Collect experiences rather than possessions.1
Recognize that there is no “sure thing” investment. Investors found that out in 2000 and 2007 when things shifted in the financial and housing markets. What returns 15-20% a year from now may not next year or three years on. Diversification matters: you never know what asset class might soar or plummet in the future, and allocating your assets across different investment types gives you the potential to reduce overall portfolio risk.
Plan for a 30-year retirement. According to Social Security estimates, the average 65-year-old man is currently projected to live until age 84, and the average 65-year-old woman, to age 87. With advances in health care, living to 95 may become the norm for the average 35-year-old.2
Plan for your retirement first, your children’s college education second. Some baby boomers did the inverse, and some who did wonder if they made the right decision for their futures. College students can work and receive financial aid; for senior citizens, it is a different story.
Switch jobs for better pay. Generations ago, people tended to stay at the same job for several years or longer, whether their prospects were promising or not. If a better job lures you, do not be ashamed to leave your current employer for it – you may gain, financially. Payroll processing giant ADP found recently that a job change resulted in an average pay increase of 4.5% for a full-time worker.3
Congratulate yourself on the good moves you have made, and plan more. Make another good move and chat with a financial professional about the ways you can continue to plan for a prosperous future.
Hear from Jeff Tilson on Long Beach Impact podcast. (Click Image)
JST Investment Consulting does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable. The information in these materials may change at any time and without notice.
1 – tradingeconomics.com/united-states/personal-savings [12/14/17]
2 – ssa.gov/planners/lifeexpectancy.html [12/14/17]
3 – theatlantic.com/business/archive/2016/02/job-switchers-raise/460044/ [2/8/16]