It’s always great meeting with people who have overcome some challenges, whether that is in life, business, or, more recently, those who have “come back” from the Great Recession and recouped their personal losses.
As I meet with these folks and help them to strategize how to continue to grow their wealth and structure it for long term tax protection and investment, I’m struck by some of the common things that these entrepreneurs and business owners all do, no matter what their industry or background and no matter how hard hit they have been financially over the years. It’s worth noting that many of them took substantial hits in their portfolios or businesses a decade ago, yet here they are, actively planning for a retirement and with little or no worry that their money will last long after they will.
So what do they all do that you should be doing? These three little things:
- Save sooner, faster, and more. As Americans, we have a love of consumer “stuff.” It could be electronics, cars, or even good food, but the simple fact of the matter is that many of us (especially Millennials) don’t begin to save enough for retirement nearly as fast as we should. When you begin to structure savings early in your career and can take advantage of principals compounding with interest over decades instead of years, you save a lot more. It seems simple, certainly, and no one ever saved their way to becoming a millionaire, but eschewing a new car to put a few more years on one that is paid for allows you to save thousands of extra dollars each year into interest bearing accounts and not carrying a load of consumer debt means far less money paid in interest each year. Think about that next time you decide to go out to eat at an expensive restaurant.
- Understand Debt vs. Leverage. We just began to touch on this in the first point, but buying a home, for example, is a transfer of liquid assets into a physical asset. You are taking a certain amount of cash each month and exchanging it for a certain percentage of ownership in your home. The same certainly holds true for your business as well, so while it may “hurt” to not take a vacation this year, investing that money back into your business, your IRA, or your home allows you to keep the money in the assets that will have value long after you forgotten the name of that cute little restaurant on the beach. These are examples of leverage, while your vacation is an example of debt. Know the difference and stay out of debt.
- Invest Purposefully. Too many times, I’ve seen people who thought only in terms of their 401(k) or their brokerage account and showed little concern to how and where those investments actually grew. More than once, unscrupulous brokers or advisors with no fiduciary responsibility steered investors into poor situations (remember Enron?) and if your strategy is focused only on what one person tells you to do, then you need to spend some time educating yourself on how you can diversify your strategies without letting that particular fox guard the henhouse.
Long gone are the days when people went to work for a company for life and then retired with a pension that paid them until death. The real world of today demands active participation in your retirement from nearly your first day on the job, but when you take an active role in that, you begin to insulate yourself from many of the challenges taxpayers faced in 2008 and you find that you’ll not only be able to weather any financial crisis, you’ll also never need to worry about outliving your money.
Staying away from tax problems can save you substantial money in penalties and interest. A lingering tax liability can steal your future gradually putting you in a difficult financial position. Call me if you would like my help. It’s what I do. Call Patrick LeClaire @ 407-287-6638 before compounding interest starts to work against your future goals.