Do you know anyone who has the stated goal to retire broke? Of course not! Americans do not begin working in their 20’s in order to retire with no money in their 60’s. Now, let’s lay this truth down as an assumption, and stay with me as I build an argument. Thus, we have an assumption that, as a general rule, the average American wants to retire with plenty of money.
Next, let’s examine the average earnings of most Americans. Have you ever considered how much money you will make in your lifetime? Not how much you will save, but how much you will actually earn over the life of your career? Considering this point can be quite a revelation. Let’s break down a real world example.
The average American will enter the work force by age 25. Let’s rewind to 1970. The average annual salary for an entry level worker in 1970 was $6,000. If a person worked from 1970 until 2010 and received only a 3%
raise each year, he or she would have earned about $500,000 over the course of a career. However, the real
life story is a bit different.
Generally, Americans will experience periods in their career when they will jump earnings dramatically in certain years, so $500,000 is a very conservative estimate. The reality is that most middle-income baby-boomers who are currently entering into retirement have earned well over $1,000,000 over the course of their careers.
Now, let’s establish another assumption that 1/3 of these lifetime earnings have been lost to taxes. That means the average American has earned at least $350,000. You would think that with some retirement planning, basic investing, and decent personal finance decisions, the average American would be able to save at least $100,000 for retirement, right? Wrong! In fact, way wrong!!
The United States government has recently compiled statistics concerning the retirement outlook for most
Americans, and the results are quite harrowing:
•62% retire with less than $25,000 in assets and depend on Social Security or family for their
retirement.
•The average savings of a 50 year old in the U.S. is $2500
How can this be? Surely it is not because Americans don’t earn enough money. We have presented a basic
argument that makes it quite clear that Americas earn plenty of money over the course of their careers to save
money for retirement. The problem is definitely not that Americans don’t earn enough—the problem is that
Americans do not properly manage the money they do save.
The First Step
The solution to most Americans financial situation is quite simple—spend less and save more. However, we all know this is easier said than done. If you find yourself in the trap of chasing the American mirage of material
greed, then begin to break that cycle of improper money management by building an emergency savings fund.
You saw the statistic above that only the average 50 year old in the U.S. only has $2500 saved. This is quite a disaster. The reality, though, is that most Americans do not save. Therefore, take the immediate action step of building a $1000 savings account. This emergency savings account will be used to fund unexpected daily expenses such as car repairs, home repairs, medical expenses, etc, and it will help break the deadly cycle of using credit to finance these purchases.
A Second Step
A second step is to track all expenses for 1month. Keep every receipt and track every purchase you make. At
the end of the month, sit down, and honestly evaluate where you are spending your money. Decide what you
can cut out and then begin funneling this extra money into savings.
Taking these two steps of building an emergency savings account and cutting back on extraneous expenses
will go a long way toward breaking the cycle of improper money management and establishing a solid financial
foundation for a prosperous retirement.
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This article was contributed by forexfraud.com, an online resource that covers different forex topics from scam updates to foreign exchange trading news.
The real key to saving is to Pay Yourself First.
Telling people to track their spending and spemd less than they earn isn’t effective. If it was, more people would already be doing it. The only sure-fire way to save money is to do it before you spend another nickel on anything else. Even better is to setup automatic investments, so you don’t have to even think about it.
Once you start to Pay Yourself First, savings are guranteed and budgeting isn’t required.
The key is to educate yourself when young and take advantage of the opportunities available to you. Like 401K investing in your twenties. Saving for big purchases instead of using credit. understanding needs from wants. the more of these typs of things you know the earlier in life the better