Are you rapidly approaching retirement age and looking for "A No-Fail Plan for Achieving Financial Freedom at Any Age"? David Bach insists that it's never too late to be rich. In "Start Late, Finish Rich" he shows you how to get from behind the eight ball to retiring wealthy.
Part Three: Save More
Most of us have heard the term "Pay Yourself First." The thought process here is that if you don't pay yourself first, you will never have enough left over to pay yourself with. We have an amazing way of spending whatever we have in our bank accounts. But, if you are getting a late start, you don't just want to pay yourself first; you need to pay yourself first faster!
One of the best ways to do this is to take advantage of a pretax retirement account. If your company offers one, you are foolish to not take advantage of it. If your company offers matching funds you should be investing at least to the matched amount. But, as soon as possible, you should max out your contribution. Why do that instead of investing some of your after-tax dollars in a different account? Just look at the math. After the government takes out taxes, you have less to spend or to invest.
The next most important key is to make this automatic. If you have to physically transfer the money, chances are an event will occur in your life that will gobble up the money you had planned to invest. You want to make sure that your savings are automatic so that you can't divert that money elsewhere.
You are probably wondering how much you should save. Bach says that you should save at least an hour a day of your income. If you're starting late (which you probably are if you're reading his book!) you should save at least two hours a day of your income. He insists that it's easier to do than you think and that the key is to just decide to do it.
What about budgeting? You may be surprised to find out that David Bach tells you to throw the budget out the window. Instead of concentrating on what you can spend and putting limits on that, he teaches that your focus should be on how much you can save. If you take care of the savings, the spending takes care of itself. But you have to make sure the savings is automatic.
What should you invest in? Bach says that your life should be interesting and your investments should be boring. More money is lost by investing on "the next big thing" that somehow doesn't pan out. Most financial experts will admit that the S&P has been fairly steady over the years. It may have seen some bad days, but if you average it out you'll find a steady upward trend. His advice is to go for the perfect pie approach and split your investments three ways: Stocks, Bonds and Real Estate. When one goes down, another of your investments will go up. By not putting all of your eggs into one basket and diversifying into these three major areas, you will be able to insulate yourself from those big drops when then come. I can testify to this method of investing. In the recent downturn in the stock market and in mutual funds (which historically do not both drop at the same time), my REIT was the only thing that still made a good, steady profit.
If you own a home, you have already begun your real estate investment. If the equity doesn't equal one third of your total investments, then you'll want to add a REIT investment to your portfolio. He provides some excellent resources on investment companies for both stocks and bonds.
If you are renting, you'll want to pay close attention as Bach explains why renters stay poor and home owners get rich. He shows you how you can purchase a home - even with poor credit (although you will pay higher interest than you would if you were debt free). Still, he insists that you shouldn't wait to buy. Tables are provided so that you can see how much house you can afford. Real estate isn't just a good investment; it actually gives you something to show for the money you are spending on a roof over your head each month. Renting does not.
Again, Bach insists that this needs to be automated. He highly encourages (as most financial counselors do) that you pay your home off in as short a time as possible. By paying your mortgage biweekly instead of monthly, you can pay it off years earlier and save tens of thousand of dollars in interest.
By following David Bach's advice on how to save more, you will be able to make up for some of that lost time and compound interest from not starting sooner. Just putting one or two of these ideas into motion will make a huge impact on how much more you will be able to save for retirement so that you truly can start late and still finish rich!
My name is Cheree Miller. I'm not a financial counselor or legal advisor. In fact, I've made some poor choices in my life. I've been broke, with creditors calling, writing, and sending court summons. I've had my bank account garnished and wondered how I was going to feed my family. But, I can tell you that you can learn to make good choices where your money is concerned. You can get out of debt if you remain focused on the end goal instead of wallowing around in a pity pool feeling sorry for yourself. Better yet, you can retire rich if you start saving for your retirement now!
Life was meant to be enjoyed. For more resources on getting out of debt and living debt free, visit http://www.imdebtfree.net/. While you're there, sign up for my free newsletter with more tips on how to get and stay debt free, and receive my free report "101 Powerful Tips for Legally Improving Your Credit Score."
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