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Generation X’d Out

Dylan Telerski / 11 Jan 2013 / Personal Finance

I remember once watching a documentary which trekked through the mountainous hills of southeast Asia. It could have just easily been the Philippines as it could’ve been China or Indonesia, though that doesn’t particularly matter. Because the focus of the film was on the rural lifestyles of village people who did not interact with the modern world and did not truly identify with any nationality per se.

What stood out in the simple lifestyle of these mountain people was their funeral tradition. Each person carved his or her own casket. Usually constructed from a single piece of wood, some would take years or even decades to complete their final resting places. One such carpenter who looked to be in his 20’s was asked why he had begun work on his casket at such an early age when surely death was many more years away. His measured response was matter-of-fact. Why would I wait until I am old and feeble, he asked, why not build it while I am young and able?

This young man’s reply has always stuck with me. Though I have forgotten the particular documentary and even the details of the village, I have always remembered the wisdom of those words which revealed such a depth of understanding about the scope of life. This young man understood the inevitability of his death and the necessity to make preparations for it. A stark contrast to American’s his age. So many of us simply set the deadlines on our calendar, but never schedule the time to complete the task.

As Generation X hits their 40’s and 50’s, they are beginning to realize that retirement could be right around the corner. Not. With pensions and social security going by the wayside, Gen X’ers bought their homes in the midst of the housing bubble and their careers have been the hardest struck by the greatest recession since the Great Depression. With personal savings as the only real hope of retirement, many are finding themselves starting from square one at 40+ years of age.

We who are now in our 20’s need to heed this cautionary tale. Though it may seem difficult to save money now at a time when you may be living paycheck to paycheck, the difficulties only increase as you gain more responsibility and your health inevitably becomes a factor. Don’t go out to the club this Saturday. Start bringing your lunch to work instead of eating out. Make the commitment now when it is inconvenient rather than impossible. Because there is a threshold beyond which your efforts will be too little, too late. Bummer, Dude.

Most people my age (their 20’s) plan to start saving for retirement in their 40’s and 50’s. As their working lives draw to a close, they plan on using the extra dollars earned over that time to bankroll their retirement. But simple math reveals that saving the same amount of money in your 20’s can yield over twice as much as saving the same amount in your 40’s or 50’s as compound interest works its financial sorcery.

The benefits of saving in your 20’s are clear. But even if a young saver is aware of the advantages of saving early in his life, he or she might feel that their budget is just too thin to spare. It’s hard enough just trying to keep your lights on in your 20’s, and with the cost of living increasing at an average of 5% over the past 10 years, it’s not likely to get any easier.

But what if you were making more money now relative to your cost of living than you would at the end of your career? In 2011 household earners between the ages of 45 to 54 have brought home 16.9% less than they did in 19991. To be sure the earnings of workers in their 20’s and early 30’s have dropped as well during the past decade, 16.2% and 12.5% respectively.

However, compared to 2010, earners between the ages of 15 and 24 saw their incomes increase by 4.6% while earners between the ages of 45 to 54 actually lost 4% of their incomes.

All the trends appear to be pointing in one direction: save while you’re young!

1. http://www.advisorperspectives.com/dshort/updates/Household-Incomes-by-Age-Brackets.php

Cash Cow. Moooo.

Andrea Sobotor / 18 Dec 2012 / Personal Finance

So listen. You know that I am getting more excited by the moment about my tiny, yet growing CASH COW that I guess people call a 401k. I think of it as a CASH COW. Is that milk? Nope. It’s cash.

There’s this thing called a payroll deduction IRA (acronym translator: Individual Retirement Account).

“Heh,” you say?

You probably didn’t say that. But I did.

So, here’s the deal. I want it. It’s a tiny supplemental thing that I can have alongside my 401k plan. Now, I have heard “IRA” thrown around in circles of friends, potentially a family member here and there.

“Yeah, I just set up an IRA through my bank blah, blah,” or, “I rolled this thing over into this IRA thing blah, blah,” and so on.

In fact, one of my best friends in the world—who is a professional bartender—waddled into her bank and set one up about two months ago. She takes in all of her $10 bills.

Cool story, and a brief aside.

If she gets a $10 bill, it goes into savings. She doesn’t allow herself to spend a $10 bill. Consequently, she is putting an EPIC amount of cash in her IRA, certainly for her income (think that the maximum is $6K for contributions if you are under retirement age, and think that she makes minimum wage). And it’s a great start for her, because like me… she’s starting at ground zero. And trust—girl is putting in her max of $6K. How does she live?

Well, the simple answer is, she is smarter than me.

And I want to make something totally clear: I am thankful for her teaching me something about saving. She took the bull by the horns (poor bull didn’t see it coming) and decided that she was going to own her future. Despite the fact that there is no ability for her to save at work, she still saw a need for it and took the initiative to do it herself. She created her own destiny and look at her now. She probably has more in her retirement account than me. BIG SURPRISE. < Not at all.

And now. For a series of action sequences!

I challenge all of YOU to a throw down on the subject of IRAs! Do it! Do it now!

What do you know about them? Do you have one? What else do you have? Share! Remember what we learned in grade school about sharing?

Wrapping up. No, seriously.

I said I was going to keep it short, didn’t I? I LIED. Wow. Writers are not to be trusted. We get so excited—kind of like a herd of over-anxious puppies with a new toy (Yep! Herd is the new pack, my friends).

I don’t know about you, but the last time I had a savings of any kind was back in 2007—as in, five years ago. It wasn’t much—but it was something–certainly not enough to retire on! My 401(k) back in the day wasn’t too bad either. But when that medical hardship came down like a ton of bricks, that’s what I had to pull from.

When life fell apart in 2008, I could not get my brain wrapped around the idea of saving even two nickels. Obviously, those two nickels, along with every couch-surfing penny I had, were already spoken for.

You may have seen in my previous blog post that I am on a personal mission of EPIC PROPORTIONS. Last week, I paid every single one of my bills. Every one! And I still managed to put 5% of my paycheck into my 401(k)!

Let’s discuss that for a minute.

I started out at 4% because that is what’s recommended, and because my employer has a match up to 4%. That is FREE MONEY! I don’t walk away from free money. EVER.

Even though all the online retirement calculators I have used say something like: “You’re not saving enough!” and there is usually some form of extremely judging frowny-face staring at me indicating with its beady black eyes that I will end up in a box under a bridge. Whatever! You can’t intimidate me! I’m on a mission!

The truth is I don’t know anything about investing. And, as much as I have been doing my homework, I want to make something clear—this stuff makes my brain hurt. You want me to add 1 + 1 without the use of a calculator? Good luck with that (even with a calculator).

Luckily for me, there was a no-brainer investment option, catering specifically to my lack of knowledge: Morningstar. It was a click of a button and BOOM! Money is saving away, it’s not scary, and I feel like I can move on with my life.

The super awesome thing is that I was so excited about saving, that I went and bumped up my contribution to the 5% I was bragging about up there. And you want to know the even MORE awesome part? Because it’s pre-tax dollars going in, it literally put more money in my paycheck. How the heck does that work? I’m saving more and I am bringing in a few more bucks. It’s magic I tell you! It makes me wonder. Can I get to 6%? 7%?

Bring it on!

What are you doing over there? Are you saving? I challenge you to a savings duel! No one likes doing this alone. So why don’t we trudge through it together?

Stay classy, America.

Sylvia, aka Debt Girl

The Ant and the Grasshopper

Andrew Answers / 23 Oct 2012 / Personal Finance

Save like the ant

As winter slowly approaches, I am reminded of a comment my father often made to me: “Don’t be a grasshopper, son,” a reference to Aesop’s classic tale about saving and frivolity. My father always encouraged me to be like the ant, and work diligently while the summer sun still shone.

As the years’ progress, I now find myself in the late summer of my life. Though I am making hay while the sun shines, I know that many members of my generation and the one following are naught but hordes of grasshoppers, fiddling away their time. When do we really ever think about our 70-year-old selves?
Speaking about retirement to a 20-something is likely to get you a face full of “there’s time for that later!” To the 30-something, it’s likely to be more like “I know, I know. I’ll take a look at that on Monday.” But, by the time we’re 40-something, we’re in a mad dash to catch ourselves up.

But what if there isn’t?
As traditional retirement support systems like Social Security and pensions diminish, personal savings become the most important way to save. It’s here that lives the need for personal savings. Sadly, many younger individuals do not understand that $100 saved now in their 20’s will yield almost 40% more than $300 invested in their 30’s.

As Einstein was once purported to say “compound interest is the most powerful force in the universe.”
In the multi-media, instant gratification society where we live, it’s easy to identify with the grasshopper that spends its time loving the spotlight. Everyone’s a star in their own way. It’s what reality TV is all about. However, it’s the ant, the one of many that know the sacrifice now for survival down the road.
Even though we’re all stars in the global community, accountability for your own savings falls solely on you. Will you become the ant or the grasshopper?

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44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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