Tag Archives: Net Worth

How To Stop Living Paycheck To Paycheck – Fidelity

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Nearly 8 out of 10 workers (78%) live paycheck to paycheck, according to a new survey from CareerBuilder.com.1 That’s up from 75% last year, and it applies even to those making 6 figures: 1 in 10 workers making $100,000 or more say they live paycheck to paycheck.

“In working with many clients over the years, I have found that most people tend to spend their entire paycheck if it is available in their bank account, regardless of whether they are at a low/middle level or are highly compensated,” says Marc Kodomatsu, a financial planner in Lake Oswego, OR.

If you’re putting away adequate savings for your goals and you have a healthy emergency fund, living paycheck to paycheck isn’t necessarily a disaster. But a quarter of Americans have no money saved for an emergency, according to Bankrate, and 20% have less than 3 months of living expenses in the bank.

“The events in Houston are a stark reminder of the perils of living paycheck to paycheck,” says Thomas Balcom, a financial planner in Lauderdale-by-the-Sea, FL. “For those folks who have flood insurance, they may not have the funds available to cover their deductible or tie them over until they return to work.”

Breaking the paycheck-to-paycheck cycle takes discipline and a plan. Here’s what top financial experts recommend as the best steps toward more financial independence:
— Read on www.fidelity.com/mymoney/how-to-stop-living-paycheck-to-paycheck

3 moves for catching up on retirement savings | MassMutual

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In order to have a decent shot at maintaining your standard of living in retirement, you should have six to nine times your salary tucked away in a 401(k) or other savings accounts by your mid-50s to early 60s.

“That’s as good a general rule of thumb as any, but most people don’t come close to that, and some don’t have anything saved,” said retirement expert Mary Beth Franklin, a Certified Financial Planner® and contributing editor at InvestmentNews, in an interview.

Indeed, in a 2014 national poll conducted by Bankrate, more than a quarter of survey respondents aged 50 to 64 said they had not started saving for retirement.1

Granted, it’s never too late to start saving for retirement, but let’s not sugarcoat this. “At this stage of the game, you would need to save 40 percent of your income to reach the equivalent of what you would have had, had you started saving just 10 percent of your income in your 20s,” said Liz Weston, a columnist with NerdWallet, a personal finance site.
— Read on blog.massmutual.com/post/retirement-savings-catch-up

Paying Yourself First

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“Don’t save what is left after spending; spend what is left after saving.”

Warren Buffett

Automated saving and paying yourself first are probably the top two things Americans can do to create wealth and financial security.

Too many people try to save in a way that’s exactly backward. They spend first and then attempt to save up toward the end of the year.

The far more powerful way to save and invest is to set aside a percentage of your income every pay period — recommended 15%, 20% or more — and to save and invest it automatically.

Inevitably rich

Most of the folks who have accumulated wealth got there by systematically socking away a reasonable percentage of their pay into a broad array of stocks and keep doing it for decades.

The key take-aways are to make your savings an automatic deposit so you don’t get a chance to change your mind and spend it. And, spend what’s left and you’re certain to be on the right path to build wealth for tomorrow. Additionally, don’t forget to invest it!

By saving first, you eliminate the problem of not having enough money to save at the end of the month. Setting up automatic deposit into savings or brokerage accounts, you can secure your financial future and build wealth.

Source: https://www.marketwatch.com/story/the-huge-financial-force-even-albert-einstein-missed-2019-12-10

What this man regrets about going from $2.26 to $1 million in five years

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BY MARKETWATCH — 12/12/2019 3:37 PM ET

Achieving financial independence took time and sacrifice — and came with some regrets
In five years, Grant Sabatier went from having just a few bucks in his bank account to more than $1 million — and he did it through side hustles, sacrifice and investing. But if he had to do it all over again, he said he probably wouldn’t have done it quite the same way.
He made many trade-offs, and a few mistakes, like “making money my God and chasing the next thing, no matter what,” he admitted.
The young millionaire, who blogs at MillennialMoney.com (https://millennialmoney.com/) and is the author of “Financial Freedom,” accomplished financial independence by making small goals for himself — first, shooting to save $1,000, then $2,000, then $4,000. As he reached his goals, he’d double them. “We usually focus on the million-dollar goal or retiring early, and while it is important to set goals, don’t let those goals distract you from taking the next step,” he said. Starting small and consistently doubling his figures made the goal accessible, mentally and physically. “If you are completely in debt and you don’t have anything saved, just save your first $1,000, and see how it makes you feel,” he said. “You’ll feel better than you thought you would.”
But there needs to be balance, something he did not account for on his path to $1 million. That means enjoying life, and that looks differently for everyone (http://www.marketwatch.com/story/its-time-to-stop-judging-people-for-drinking- lattes-and-getting-regular-haircuts-2019-05-14). Stripping yourself of experiences and items that are meaningful can backfire. Sabatier said he had to detox after five years of working 100-hour weeks and traveling, for example.
Hitting a financial goal should be less about quantitative reasons, like having $1 million in an investment portfolio, and more about qualitative reasons, like leaving a job you hate or paying for an annual family trip. “It’s about looking at your life. Do you feel like you’re growing? Do you feel like you’re in a place you like and you have friends you like? Do you like your life?” Sabatier said. “If the answer to that question is no, then the first place you need to look is your money.”

— Read on www.marketwatch.com/story/what-this-man-regrets-about-going-from-226-to-1-million-in-five-years-2019-12-12

Net Worth and Measures of Financial Health

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Source: MyMoney.gov

For many households, financial health is measured by income. While income is an important component of financial health, it is only part of the equation.

Some experts and academics believe that an individual’s net worth is a better measure of financial health than income. Net worth or wealth can determine if a family has the wherewithal to deal with a financial crisis, such as the loss of employment or long-term sickness.  And it also allows for investments in a home, small business and higher education. In other words, a household with no wealth or negative net worth may not be financially healthy despite a high salary.

euro-seem-money-finance

Photo by Pixabay on Pexels.com

The type of assets held by a household also affects its financial health, with illiquid assets and short-term liabilities a greater potential risk than liquid assets and long-term debt.

For many financial educators and households, assessing a household’s net worth is the start of the conversation. It allows financial advisers or households to create a financial plan that considers assets and liabilities which can lead to better financial health and outcome.

Net worth considerations would also provide policymakers with a more accurate picture of financial health to assess middle class economic security across different demographic populations.

There are other reasonable approaches to considering overall financial health or well-being. For example, the Center for Financial Services Innovation (CFSI) looks at four components (spending, saving, borrowing, and planning) and eight indicators of financial health as well as data that can be collected to make the financial health assessment. The data collected to measure the financial health for each component range from the difference between income and expenses (for spending) to the debt-to-income ratio (for borrowing) to the type and extent of insurance coverage (for planning).

The type of assets also matters for financial health. For example, CFSI distinguishes between liquid and illiquid assets by pointing out that liquid assets are “important for coping with an unexpected expense,” while [illiquid] long-term savings promote financial security.27

Financial well-being has been identified as a common outcome goal of financial education efforts.28 CFPB has developed a robust and validated scale to measure a person’s sense of financial well-being, which CFPB defines as the “state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”29 While this measure is subjective, a number of trackable and objective factors are strongly associated with a person’s level of financial well-being, most notably having liquid savings.

27. Parker, Sarah, Castillo, Nancy, Garon, Thea, and Levy, Rob,“Eight Ways to Measure Financial Health”,Center for Financial Services Innovation, May 2016, available at: https://s3.amazonaws.com/cfsi-innovation-files-2018/wp-content/uploads/2016/05/09212818/Consumer-FinHealth-Metrics-FINAL_May.pdf.

28. For example, see Financial Literacy and Education Commission, “Promoting Financial Success in the United States: National Strategy for Financial Literacy 2011”, available at: https://www.treasury.gov/resource-center/financial-education/Documents/NationalStrategyBook_12310%20(2).

29. “Financial Well-being: What it means and how to help”, Consumer Financial Protection Bureau, 2015, available at: https://www.consumerfinance.gov/ data-research/research-reports/financial-well-being/.