Steps Today to Build Security for Tomorrow
By Pamela Yellen
Are you among the millions of Americans who have struggled
to rebuild your savings since the recession? If so, there are simple,
time-tested strategies you can use to spend less and save more.
A new survey by CNNMoney found that many Americans are not
saving enough for retirement or emergencies. Only half of respondents reported
good saving habits, including having a spending and/or saving plan in place.
“We know from other research that if one doesn’t have
adequate emergency savings, it’s much more difficult for people to save for
other purposes, either a home or retirement,” said Stephen Brobeck, executive
director of the Consumer Federation of America, which conducted the survey
along with the American Savings Education Council.
To make matters worse, more than 25% of Americans are
dipping into 401(k) retirement accounts to pay their bills, the LA Times
reports, U.S. workers are tapping into nearly a quarter of the $293 billion
placed in-to their retirement savings each year to pay for mortgages, credit cards
and other debts, according to a report from financial advisory firm
In addition, Vanguard, an investment management group, said
the number of Americans workers withdrawing money from 401(k)s or taking out
loans against their accounts jumped 12% since 2008, the Times reports.
So how can you start building (or rebuilding) a nest egg?
Start by following these steps:
Get Clear on the amount of your net income and current
expenses, including the inevitable unexpected expenses such as auto and home
repairs. With this information, you can begin to design a solid spending plan
that makes sense based on current realities. Look at your income and expenses
line by line. Where can you make adjustments? There are many software programs
for doing this, but even listing your expenses and income on a legal pad works.
Plug Money Leaks — Many people consider only large
expenditures, such as refinancing a home, when looking to save money, but
finding small areas where you can save is just as important. These are usually
areas of spending that are almost unconscious: the latté on the way to work
each day, the extra $15 per month on cable channels you don’t watch, the
additional money spent on “name brand” groceries.
The first step to plugging these leaks is to identify them.
Note each small spending habit and add up its annual cost. Next, ask yourself, “Do
these small expenditures really make a difference to me? Do they really add to
the quality of my life? Or are they just habits that could be eliminated or changed?”
The 10/10/10 Financial Formula — To build true financial
security, consistent saving is critical. I recommend the time-tested “10/10/10
Savings Formula. It may seem like a stretch at first, but work towards setting
aside 10% of your income for short-term needs, 10% for mid-term needs and
potential emergencies, and 10% for long-term retirement planning. This will put
you in control of your money and finances.
Look Beyond Traditional Saving and Investing Methods — Many
people do not realize there are proven and time-tested ways to grow a
substantial nest egg without the risk or volatility of stocks, mutual funds,
real estate, and other investments. One asset class has increased in value
during every period of economic boom and bust for more than a century:
dividend-paying whole life insurance. A dividend-paying whole life policy grows
by a guaranteed and pre-set amount every year.
These policies also provide peace of mind for retirement
planning, because you know the minimum guaranteed value of the policy on the
day you plan to tap into it... and at every point along the way. In addition,
riders can be added onto the policy that make the cash value grow significantly
faster than a traditionally-designed whole life policy.
Whatever your financial circumstances, you can take steps
today — even if they are just small steps — to move toward your financial
goals. As soon as you take positive action, you will reap the reward of more
peace of mind.
As a consultant to financial advisors, Pamela Yellen
investigated more than 450 savings and retirement planning strategies seeking
an alternative to the risk and volatility of stocks and other investments. Her
research led her to a time-tested, predictable method of growing and
protecting. Her book, “BANK ON YOURSELF: The Life-Changing Secret to Growing
and Protecting Your Financial Future,” is a New York Times Bestseller. Learn
more at www.BankOnYourself.com