The
Lottery Is No Retirement Plan
Pay
yourself first instead, with your future in mind.
Powerball fever swept across America last week, with a record jackpot
of $1.5 billion eventually being split by three winners in the January 13
drawing. Millions lined up for lottery tickets, hoping to realize their dreams
of being rich, independent, and carefree.1,2
This infinitesimal chance at massive wealth was certainly alluring – to
too many, more alluring than the practical steps that can be taken in pursuit
of personal wealth and retirement security.
The passion for Powerball defied logic. It may have been a commentary on our wishful thinking,
and on the lack of financial literacy in America as well.
On January 13, a Powerball ticket buyer had a 1-in-292-million chance
to win the big prize. In comparison, the odds of someone being killed by a
falling vending machine within the next 365 days are 1 in 112 million, and the
odds of a person being struck by both lightning and a meteorite during their lifetime
are 1 in 210 million.2 What
if we simply saved $4.33 per day, or more? Our financial lives might take a turn for the
better.
Usually, wealth is not a matter of fate
or luck. We can all take practical
steps toward financial freedom, and even if we do not end up rich, those steps
may improve our personal finances and retirement prospects.
First, spend less than what you make. Two or three percent less, 5% less, 10% less –
whatever the number, it must be calculated from a comparison of your monthly
income versus your monthly budget. That comparison may take a half an hour, but
it is time well spent. Size up the money coming into your household per month
with the money going out of it per month, and set a percentage that you would
like to save every month
Two, direct these savings into
investment accounts as well as savings accounts. It is vital to build up savings so that you can have
an emergency fund – a good, strong emergency fund amounts to several months’ worth
of salary. Another portion of the money can go into retirement savings
accounts, preferably to be invested in equities. Yes, 2016 has started poorly
on Wall Street, but one bad month (or year) is not the historical norm for the
market.
Three, cut down bad debts. There are some “good debts” in life – debts that we
take on in pursuit of a worthy outcome, such as a home loan or an education
loan. Bad debts outnumber them, and the average credit card statement will note
many. Some financial professionals and consumer advocates will tell you to try
and pay off the debt with the highest interest rate first, then the one with
the next highest interest rate, and so on; others will tell you to eliminate
the smallest debt first and work your way up to the largest.
Four, chat with a financial professional
to determine your money goals. When
will you have enough savings to retire? When should you claim Social Security,
and how long should you keep working? How much monthly income might you need
when you are retired? Most people retire without any answers to these
questions, only guesses. It is important to know not only what you are doing,
but also where you are going – and through a long-run saving and investing
strategy, you can set objectives and measure your progress toward them over time.
The fantasy of receiving great wealth with no effort inspires people to
play the lottery and try other forms of gambling. The reality is that building
wealth and saving for retirement take planning and commitment.
John Heil may be reached at 760-434-3575 ext. 101
or john@marketcapitalmanagement.com
www.marketcapitalmanagement.com
This material was prepared by MarketingLibrary.Net Inc., and does
not necessarily represent the views of the presenting party, nor their
affiliates. All information is believed to be from reliable sources; however we
make no representation as to its completeness or accuracy. Please note -
investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Citations.
1 - cnbc.com/2016/01/14/lost-the-powerball-now-its-time-to-really-focus-on-finances.html
[1/14/16]
2 - latino.foxnews.com/latino/money/2016/01/13/what-powerball-chances-likelier-hit-both-meteorite/
[1/13/16]
