When I got into this business in 1973, we advised our family clients to save one to one-and-a-half years' worth of income for emergencies. Back then, 70+% of Americans had some sort of a pension plan. Back then, it was called a defined-benefit pension plan. Your benefit was a formula based upon highest-earnings years, number of years with the company, and you and your spouse’s life expectancy. How the payout worked is based upon an actuarial formula. It is not, as my good friend and “Financial Entertainer” Dave Ramsey, radio host, calls a bet with the company on how long you will live. The options are all very fair, if you understand how they work. The details are for another blog.
When we don’t have a saving structure, when an emergency happens, and they always do, we tend to put the cost on a credit card or borrow from our 401(k). The emergency then usually lasts longer that expected. We now have a debt, an additional bill we have to deal with. If that debt is minor, such as a new roof, furnace, or small medical bill, recovery is manageable.
If, however, that debt is helping our three children with the bloated Cost of College and related expenses, this debt can destroy the family finances and permanently alter the best-laid retirement plans. These costs, as our clients will tell you, can easily be two or three hundred thousand dollars.
Helping families with how to handle these financial matters is why Ensphere College Planning Services was formed over 10 years ago. Even if you don’t have students attending college, you need to learn how to properly save money after-tax.
I have attached a Saving and Investment pyramid for your use. Read it, understand it, and try to emulate it in the future. More will be written on this subject in the weeks ahead.
For more ideas, insider tips, and videos, visit our site at www.enspheremg.com.
Mike Giffin, Ensphere Marketing Group
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