Thursday, May 23, 2013

Poor People Save. Rich People Invest.


One thing you rarely hear discussed at job networking events, but everyone is thinking about, is money. It's the scariest part of being in job transition. If you don't have an income coming in, all you want to do is replace it.

Growing up, we were told to work hard, save our money and we would will be fine when you retire.  That's not going to work out for most of us anymore. Not just those who have lost jobs, but also the new kids just starting out. It's nice to think that you can spend 5-10 years being "irresponsible" after college because you know when maturity kicks in your are going to be killing it on the saving side. Unless right before you "grow up" you get laid off. BAM. Yeah, it happens, and it's still happening.

BLAH BLAH BLAH
My point is this: unless you can look at your savings balance and be sure you have enough money to last you 30-40 years at your current lifestyle and taking into account and unforeseen health issues, you need to save more.

FORGET SAVING
You know how rich people got rich? Not by putting their money in a bank and getting 1-2% interest.  Like the title says: Poor people save. Rich people invest.  Once we accept that premise, we can move on.  But you have to accept that. You have to wrap your mind around the fact that just putting your money in the bank will probably not allow you to retire to a lifestyle"in the manner to which you have become accustomed. If that's not high on the importance scale, fine. Just don't be surprised when you're getting the gold watch if it's not looking pretty.  Like the Boy Scouts say, the secret is to be prepared. From day one you have to prepare for that unexpected moment when the fertilizer hits the ventilator. Because at some point it most likely will. And it will be at the worst possible moment.

By definition, whatever you choose to invest in will have some risk attached, be it real estate, stocks, bonds, derivatives, MLM, tea, a small business, education, the lottery... Whatever you choose to invest in, educate yourself on it, make sure the risk level is acceptable as is the potential return, that you can do it long term, that's it's legal, doesn't look too good to be true (Bernie Maddoff's victims thought they had found the goose that laid the golden egg. Had they - or anyone - took a realistic look at what returns he was getting they would have quickly realized that something wasn't right. I'm not saying they were stupid, but good news blinds smart people. Remember Circuit City?  They were making money and ignoring the problems in their system - because they were making money.  Totally off topic, that's exactly why I won't buy Walmart stock, no matter how well it does. In my opinion, they got issues. Sure, they're making money, but when they hit the wall I think they will, it's going to be a massacre.  I digress.)

The bottom line, your chances of retiring comfortable by saving, unless you are extremely disciplined and deny yourself all your life, aren't that great.  Change the game....

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