Achieving Your Financial Goals in All Economic Cycles
By Vinson Primas
In America, Charles Schwab brokerage firm published a book that states a survey that indicates only 3% of the people in America will wildly exceed their financial goals, 7% will meet there financial goals, 90% will need some form of help from others when they reach age 65.
Simply put, a high school graduating class of 100 people, there is a strong possibility that only 10 people will be able to live financially independent when they reach age 65, despite class, race, creed, # of family members, educational and economic opportunities, job promotion, pay raises and geographic location.
As a member of such a high school graduating class, I started researching ‘why’ and ‘how’ was this survey results gathered and was it really reflective of the US population. If the survey results were true, is there a conspiracy by hidden forces to keep a particular race (minority) in economic bondage as stated by Minister Louis Farrakhan in a lot of speeches in the inner city and to his Islamic Faith Followers.
My research findings discovered there is a way for anyone who can save $500 to get started in the stock market. Also that there are multiple ways to create paths toward becoming a millionaire over a 40 year span ( age 22- 65, most people working years). During this time people will work, marry, have babies, buy several cars, buy a couple of houses, go on vacation, attend church, get sick, make new friends, give old items to charity and buy there favorite music.
The number one key that differentiated the members of the 3 categories were personal financial goals, that was having achievable and believable goals in the heart and soul of the individual. Therefore, developing a financial plan that consisted of saving a percentage of take-home pay every month of your working life, obtaining insurances at a young age, building an emergency nest egg, establishing a good credit history, and eliminating your mortgage payment as quick as possible, invest in a small business that fits your passion in a growing industry, and living on a monthly budget that does not exceed your monthly income.
As old-fashioned and simple as these findings are, they are not followed by the majority of folks. Most people make financial decisions by listening to the media (talking heads) regarding the web and flow about the stock market directions, making must-have consumer purchases based on commercials, that create high levels of consumer family debt. Theoretically, the government encourages consumer spending via debt acquiring to keep the economy afloat. Yet, when you turn 65 – 67, social security provides you with a retirement check for about 19 – 33% of what your last employment paychecks were.
I discovered a personal financial lifestyle system (it de-clutters your mind and budget) that works for a individual or family to utilize in order to obtain monthly, annual and lifetime goals and still have lots of fun along the way.
It takes your monthly budget and dividing it into percentage categories: 70% – committed household expenses, 10% – charity or religious donation, 10% consumer debt, and 10% savings. This system works efficiently and effectively to achieve your family goals. You can utilize coupons to reduce costs in a area, purchase clearance sale items, purchase name brand items at a discount stores, make an effort to reduce current debt levels, and buy certain items in bulk during certain times of the year..
Let’s examine how you can breakdown your household spending and live on the 70-10-10-10 system.
70% – spend on committed household expenses• 8% medical/life insurance• 25% housing• 15% groceries and personal allowance• 8% utilities and telecommunications bill• 4% miscellaneous expense• 10% car (affordable, reliable, economical)
10% Savings• Build your emergency savings first (3 to 6 months) living expenses. It may take about (5) years to save this money for the average worker. It will serve as a cushion to absorb (unexpected expenses …auto, layoffs, family) as you concentrate on investment goals for retirement and kids college.• Once the emergency savings is established, then you begin to invest in retirement, kids college(so they can learn a trade an be self-sufficient). Once these obligations are met, you can focus on developing your hobby into a million dollar business
10% Consumer Debt• Setting limits on the percentage of consumer debt outside of auto purchases help keeps the ‘frivolous spending’ down. If the consumer debt is reduced, you can reward yourself with ‘fun money’. Weekend getaways, season tickets to a favorite sport, vacations, etc.
10% Charity Contributions• Giving to a local charity or religious organization that provides a service in your community.• Although there are many arguments about christianity and giving(tithes and offering). I know for a fact that GOD is faithful and loving towards you. Giving to help others activates the ‘Laws of Reciprocity’ towards you. Giving also allows you to share your wealth with the world and live a more fulfilling lifestyle.
Investing in Retirement and Kids College• Warren Buffett, states in the book, BUFFETT, for the small investor the best investment is to purchase index funds that mimic the market. The lowest cost financial firm offering these firms currently is Vanguard Mutual Funds. Dollar-cost averaging is the best strategy to invest for the long-term.Economist Zvi Bodie, author of ‘worry-free’ investing, suggest to invest in financial instruments called TIPS (treasury-inflated protected securities) and Bonds, for retirement, risk-free in truly safe assests, which may require more savings (20%) to achieve financial goals.
Another tip would be to purchase life insurance between age 22-25. Universal (variable) Life insurance to build a high value policy for the lowest price possible.
Consider the following facts, Jane lived in Plano,Texas and Jim lived in Cedar Hill,Texas. The houses was exactly the same size, except Jim house cost about $100K less, Jane put all her money into mortgage and the finer things in life. Jim lived simple and saved. When both were layed off from there respective jobs. Jim lived off savings and Jane lived on credit cards. The most amazing result in this scenario was that when both went to file the Federal Taxes the refund was the same. The only difference was that one had saved money, participated at a higher level of charitable giving that helped his community and lived a more fulfilling lifestyle.
I suggest that you find a hero that has attain the goals you would like to attain and become inspired to mimic. Anne Scheiber, is a little known investing queen, according to Money Magazine in 1998, in her lifetime she took $5K dollars and amassed a $22 million in dollar fortune as a small investor who followed a simple formula of buying blue chip stocks, that was low cost in growing industries and living a simple life.
The next time you go to the MALL, don’t become a slave to ‘shoulds’ at the expense of your goals (eliminate debt in your household and manipulative people, by any means necessary).
Try this personal financial system and see if it works for you. Remember, ‘I can’t’ is really a cloak for the phrase ‘I choose not to’ be financially independent in my lifetime.
Online life coach and financial education company. The author has a diverse background as a IT executive for blue chip and a Big 4 Accounting Firm for the past 20 years. He has dedicated his life to assisting learning disability persons with life skills. He is currently serves in a role educating others about career/life transition skills.
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Today though I took on the challenge of decluttering and organizing my four year olds room, which is also mommies second room for the overflow of my things! (sigh)
