I lived my entire life with the fear of heights, and it’s caused me to miss out on some spectular experiences (just ask my wife). I’ve seen stats that indicate that upwards of 25% of Americans also share this phobia. Although I haven’t been able to completely overcome the fear, I have been able to find strategies to manage it better.
Unfortunately it’s been purported that 85% of U.S. adults suffer from financial anxiety with the biggest fears:
- Never being able to retire
- Always living paycheck to paycheck
- Living in debt forever
Some of these fears are real and with more people living longer well into their 80s and 90s, now is the time to consider new strategies so you can minimize the financial stress through your lifetime.
#1: Save more
The average American saves less than 5% of their income. Some Americans have no savings at all, or they have debt instead. Some people invest but neglect to save and have to raid their retirement accounts—paying penalties and taxes—for every emergency.
We recommended saving 20% of your income. That might sound intimidating or even impossible, but it’s not. It starts with a decision and it requires a mindset committed to living below your means. If you can’t do 20%, start with 5% and move up from there.
Save more money, and you’ll have liquidity for opportunities as well as emergencies. You’ll end up with more money to invest, without compromising your savings or having to chase after unrealistic rates of return.
#2: Reduce risk with asset allocation
You may know the joke about how 401(k)s “became 201(k)s” in the Financial Crisis. People who planned on retiring saw their investments plummet as much as 50%.
“Easy come, easy go” should not be a phrase that applies to your investments! But the problem is this: most people’s portfolios are comprised of nearly all stocks, and stocks are subject to systemic risk.
For investors with truly diversified portfolios, the “Great Recession” was more of a speed bump than a roadblock to retirement. Reduce your risk by investing in:
- private lending instruments such as bridge loans
- cash-flowing real estate
- business investments
- alternative investments such as oil and gas
- life settlement funds
- and high cash value life insurance.
#3 Raise financially independent children
This is one that is near and dear to my heart. Being a parent I know how expensive it can be to raise children from childcare, clothes, and food to college expenses.
Unfortunately, some parents keep spending resources on adult children who remain dependent. Increasingly, kids are moving back in with parents after college, where some overstay their welcome.
To avoid this, help kids learn responsibility and independence from a young age. Encourage them to earn (even if it’s through chores or babysitting), save (even if it’s from gifts and allowance), and make wise choices with money.
I love playing games with my kids to help educate them on key financial concepts and principles. My two all-tiime favorites are Monopoly and CASHFLOW, and I’m still able to pull my kids from their videogames to play once in a while.
#4: Consume assets strategically
The amount of money accumulated in assets isn’t as important as the amount of spendable income produced by those assets! By accumulating the right assets and spending them in the right order, you might end up with hundreds of thousands of extra dollars in your pocket!
By strategically consuming assets in the most efficient way, you can:
- dramatically reduce taxes
- increase your cash flow and
- protect yourself from market swings and low interest rates
- while increasing your net worth and (likely) leaving more to heirs.
Planning for retirement doesn’t have to be so scary if you take the time to think about what you can do now to better prepare.