By Timothy Barrett, Argent Trust Company
When I introduce myself as a Wealth Advisor, I sometimes hear a quick chuckle, “I’ll call you when I get wealthy.” You don’t have to “get wealthy” to need financial services. In fact, the issue for most families isn’t an abundance of assets, it’s how to cover setbacks and fund retirement.
The Census Bureau recently reported that the median net worth for those under 35 is only $4,138 and their home equity is just $2,762. Those 55 to 64 years old have a median net worth of only $66,547 with home equity of just $97,951. Their home equity is an illiquid 60 percent of their total net worth. To summarize, by retirement, the median worker has saved only about $2,080 a year over 30 years with the rest tied up in the residence.
If you find yourself following this trend, here’s your heads up. Start now to spend smart, save more and eliminate risk behaviors that can lead to financial and personal failures. But how? So, here is a list of the best ideas from a multitude of sources. You likely can’t follow all of it, but you must do more.
- Stop all impulse buying, delivery programs and TV shopping.
- Use coupons and always buy on sale.
- Never shop for entertainment.
- Drop the gym membership: go to free classes in your community or pay as you go.
- Get a prescription card, like GoodRx, and move your scripts to the cheapest provider.
- Make your coffee at home and skip the coffee shop.
- No soft drinks or bottled water; drink tap or filtered.
- Buy supplies in bulk and buy the grocery store brand.
- Shop consignment and Goodwill.
- Drop cable TV; subscribe to Netflix, Hulu Live TV, Vudu, or similar services that you actually watch.
- Switch to a mobile discount plan; many are under $40 a month.
- Turn off in game purchasing on all your devices.
- Sell your new car and pay off the loan, take public transportation instead.
- If you must, buy a good used car, between three and six years old, that you can keep for a decade.
- Always carry auto insurance with collision and comprehensive coverage and roadside assistance.
- Plan and cook three meals a week with leftovers for lunch at work.
- Never take out a paycheck loan.
If you can’t pay off your credit card each month, stop using them for anything but essentials; use cash instead.
Contribute at least enough to your 401(k) plan to get full employer matching. Your contribution is tax deferred and the employer match is part of your compensation. Not taking it is like handing back three weeks’ pay each year. Employer matching varies between matching 3 percent and 6 percent of salary.
If you don’t have an employer 401(k), open an IRA with automatic withholding. You can contribute $5,500 a year tax-free; about $211 a pay check.
Transfer 10 percent of your paycheck to savings automatically. You may have to transfer some back throughout the year, but you’ll think about it first.
Eliminate risk behaviors
- Get seven hours sleep, eat less meat, and drink more water.
- Take daily walks or run, cycle or hike.
- No illicit drugs, alcohol, smoking or vaping (they’re very expensive and bad for you).
- Never drink and drive or let a drinker drive you.
- Always drive the speed limit.
- Hang out with equally healthy friends and family.
Already have too much debt?
If you have too much debt, figure your minimum payments for all the credit card and loan balances and pay 10% more each payment until you catch up. If you’re really behind or can’t swing the minimum payments, always pay at least something. Call and ask for a payment plan.
Be wary of consolidating debt and avoid debt settlement offers. The consolidation rates may be lower than you’re paying but the loan is extended so you pay more interest over a longer loan term. Debt settlement companies charge a high initial fee with a promise to negotiate your debts lower later. Some debt settlement companies have been prosecuted for fraud. You can negotiate a payment plan yourself for no fee by just calling the creditor and asking for help. But none of that will work unless you make the agreed upon payments on time.
If your debt is student loans, you can renegotiate them, too. But first you must exhaust the payment reduction and postponement programs through the lender. For federal loan programs, that includes graduated, extended and income-driven repayment plans, as well as deferment and forbearance options, which are also offered through nearly every major private lender. Once again, you must stick to the agreement and not default.
Spend your money well
Sign up for any employer group health, life insurance, disability, casualty loss, and long-term care coverage offered. Add vision and dental, if they are good plans. This coverage is essential to replace lost wages and avoid financial troubles.
Think about the things you like to do and spend your money there. For every purchase, ask yourself three questions: Do I really need this? Is there a better option? Can this wait? You must change the way you live and spend money to eliminate debt and create financial security. You should start today.