Wealth Building Comes From You

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An excerpt from “A Beginners Guide to Wealth Building” 

Wealth Building Comes from You

The Saving Program and You

We are in an era of living the highest quality of life in the world. Some of us maintain this high quality of life through “Credit Card Slavery”. Credit Card Slavery is the price you pay for living beyond your cash flow means. Simply stated: some people have become slaves to their creditors. 

When they go to work, they don’t go to work for themselves. They go to work to pay their creditors. If they do not pay their creditors, the creditors repossess their cars, foreclose on their homes, and reduce their purchasing powers through low credit scores (FICO). 

Low credit scores prevent people from a whole host of things to improve their quality of life. All of these things prevent people from saving for tomorrow. You can live in a world of credit and still save money for your financial future. 

The question is: How do you do it?

How much should I save?

That is the magic question everyone wants to know! Knowing this will determine your retirement needs. Thus, the answer is: It depends…

  • It depends on how much debt you can get rid of to free up excess income.
  • It depends on how much your salary will grow in the course of your working life.
  • It depends on the rate of inflation. Inflation eats away the value of your money, so you want to earn more than the rate of inflation.
  • It depends on your Return on Investments (ROI). If you can generate 8% or more (as a rule of thumb), you will accumulate more value in your investment portfolio.

Plan on 70% Rule (income in retirement)

It is rare for people to earn 100% of their current income in their retirement years. When you reach retirement age, expect to earn 70% or less of your current income. If you plan on continuing your current lifestyle, you will need to supplement your retirement with invested savings. You must also consider your medical health and your life expectancy (outliving your money). People make all kinds of excuses before they start investing.

Investing today cannot wait until tomorrow. Why? The graph in the Appendices, Exhibit 6 shows, the difference between saving now and waiting three years. It is costly.

In the Appendices, under Exhibit 6, if you invest $100.00 per month and earn 8%, over a 30-year period you will accumulate $149,035.00. If you wait three years, you lose the opportunity of making $34,897.00. The contribution per month (left column) shows increasing contribution amounts. It also shows how much you would earn versus if you wait three years. Just think, investing $300.00 per month will generate $447,108 over 30 years versus $342,414.00 over 27 years. The difference is $104,694.00. That’s a lot of money!

 

 

 

Robert L Woods

Robert L Woods

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About Me

Robert L. Woods is the retired partner of the Institute For Fiduciary Education (www.ifecorp.com) that provided investment seminars for public and private pension funds, endowments and institutional fund managers. He spent 28 years working for the State of California, as a budget and financial analyst which includes 16 years as an Investment Officer for the California State Teachers’ Retirement System (CalSTRS). At CalSTRS, he established it as one of the nation’s first institutional home loan programs with a down payment assistance component. He also spent 13 years on the Board of Trustees for the Sacramento County Employees Retirement System (SCERS). He was a Trustee with the University of California, Davis, Cal Aggie Alumni Association and a member of the Chancellor’s Council on Community & Diversity. He is a Life Member: Phi Beta Sigma Fraternity, Inc., Theta Gamma Sigma Chapter, Sacramento, CA.

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