Is it too late?

Is it too late?

Perhaps there is nothing more annoying than those articles telling people how much money they should have saved up by a certain age. As if everyone on earth has the same benchmark at the same exact age to live a fulfilled life. Pretty ridiculous isn’t it?

One of the aspects of thinking like a financial planner is always thinking in ‘worst-case scenarios’. For example, my job is not to make people rich, it is to ensure they are never poor. I ask a bunch of questions, match up what we offer to client’s goals and make clients aware of what could be a ‘worst-case scenario.’ It’s best to be fully transparent in this regard.

So, what is the worst possible scenario for someone financially? I think there are several and it will definitely vary with a matter of opinion, but let me give you one example.

Let’s pretend you are 60 years old and have nothing saved up for retirement. This would mean that your only source of income in the next decade outside of your job would be social security. You have a job, but zero in an employer plan, no pension, you don’t own a home, you have nothing in savings, etc. Bare bones, 60 years old, working a full time job and have zero assets to your name.

What do you do?

Maybe you don’t do anything and social security is the answer to your future. After all, at age 70 you can claim the maximum amount of benefit and maybe it would replace the income you make at your job.

Or maybe it wouldn’t.

Let’s say at 60 years old you are single and bring home $5,000 a month after taxes (net). For easy math, let’s pretend at age 70 your social security would be $3,000 a month. So, as you can see, there is a $2,000 shortfall. What do you do?

You can keep working. That would be an option. As long as your health allowed it.

But what if it didn’t?

So what advice would I give to a 60 year old with no assets who wants to retire in 10 years?

I’d give the same advice to a 60 year old with no assets who wants to retire in 10 years as I would to a 16 year old who just received their first paycheck.

Give ten percent, save ten percent, live off eighty percent.

Why would I do that? What if I can’t afford that?

Perhaps you can’t afford to give ten percent right now. Or save ten percent right now. But maybe that would be a goal you could work towards each month until you reach it? *Or maybe more than ten percent!*

If the 60 year old making $5,000 a month started with one percent giving, one percent saving and increased it by one percent per quarter until their goal is reached of 10/10, would that be helpful? Of course it would, but it in more ways than one.

When we consistently give and increase our giving, it changes our desires. If this person doesn’t give and makes $5,000 a month at age 60, they will need $5,000 a month at age 70 to maintain their lifestyle (inflation not included). But if they make $5,000 per month at age 60 and work their way up to ten percent by age 70, they will only need $4,500 per month to maintain their lifestyle.

And what about saving and investing combined with giving? Same thing. $5,000 per month at age 60 will need $5,000 per month at age 70 and older (actually more when we figure in inflation, but I’m trying to keep this simple). But someone who is increasing their giving and saving will go from $5,000 per month at age 60 to $4,000 per month at age 70.

We still have a gap in income and lifestyle but it has considerably closed. And from there, the options to fund that gap have increased and we could review them during the planning process.

Why do we give and save? Consistent giving to a cause that you are passionate about and have a relationship with will change your desires. You will desire less of the things you thought you wanted and desire to help others in ways that fulfill you.

*What's the last thing you spent a lot of money on but don't use as much as you thought you would?*

Saving and investing requires discipline and patience. It teaches us to go without but it also teaches us to appreciate what we do have. It’s a long term focus but it also is teaching us to live on less at the moment which reduces the lifestyle we want to create for ourselves.

*Do you ever feel guilty about spending too much money and not saving enough?*

So, regardless of where you are at in life, it is never too late to start giving and saving more. And may your giving, saving, and investing eventually match the lifestyle you desire.

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