Tuesday, January 17, 2012, AM | Leave Comment
I am not a pessimist by nature and that could be one reason I ain’t got much for retirement as I would be 64 years old in April 2012. I always thought (maybe didn’t think) of retirement as something in the farthest corner of my future. Well! That future is upon me now. When I look back, I missed many, and I mean many, financial opportunities that came my way. Does that make me a fool to not take advantage of them? Yes! Because I would have been a lot better off financially than I am today.
The Two Extreme Ends of the Pendulum
Survival in general and financial survival in particular is the art of staying alive, financially and otherwise. In these pages, I have mentioned to change your mindset about spending and saving. That’s basically mental attitude that can go extremes in either direction like a pendulum.
At one extreme end of the pendulum, you are a heavy spender, thereby getting closer and closer to debt-laden life (Ed McMahon comes to mind) or worse declaring bankruptcy no matter how rich you are. You may be the richest man alive but if your spending is more than your income, then any fool can see you would get into debt. If you continued to do so, you would be on the path of financial destruction.
At another extreme of the pendulum, you have become a penny-pincher. You just save, save, save. But save for it? If it’s for your retirement, then it’s Okay to save. Saving to increase emergency fund is another good thing. But some folks don’t spend at all, thereby not enjoying life at even the very minimum. You must spend but be careful when you spend. It must show you are in control. Remember more than two-third of the U.S. economy runs on consumers’ spending.
What you should do?
Don’t think for a minute you are rich, and nothing, as in financial disaster, can happen to you. If you are poor, don’t think for a minute that as you don’t have much, nothing, as in financial disaster, can happen to you.
One thing you definitely can do is to keep a balance between spending and saving. Don’t let the pendulum swing to either extreme. Moderation is the key in both spending and in saving.
It’s too bad many people don’t plan better to avoid the pain of bankruptcy. The cardinal rule is to pay yourself first. Paying yourself first means setting aside an emergency fund and a retirement fund. Living off a small percentage of the net after taxes and business expenses for a few years would enable high earners and not so high earners to set aside enough for that rainy day.
In a Nutshell
The more substantial the income, the more conservative the investments should be. Preserving capital, not necessarily growth should be the game plan with the really big earners.