Building Wealth

December 8th, 2011 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Investments - (0 Comments)

There are pretty much three ways to become wealthy.  Inherit it, win it, or work for it.  Unfortunately, only one of these areas you can control.  The other two are pot luck.  We’re only going to talk about the third way today and how you can get your savings strategy under control.  Earning more money can certainly make it easier to build wealth, but that isn’t the only ingredient when it comes to building wealth.

A competent financial advisor will tell you that saving money is important when it comes to building wealth.  Saving often and a lot may help you reach your goals but having a well thought out strategy that you can stick to is typically more important.  You don’t have to fall short of you goal just because you didn’t plan.  Figure out how much you need to save on a monthly basis and at a target rate that fits into your risk tolerance.  Compounding your money over time can add up to a hefty amount.  Here are some quick numbers to show you the impact of saving, or not saving.

 

Annual Rate of Return each year over 30 years.

Monthly Savings Annual Rate of Return Years Estimated Total **
$ 50 8% 30 $74,517
$100 8% 30 $149,035
$200 8% 30 $298,071
$400 8% 30 $596,143

**This is a hypothetical example and is not representative of any specific investment. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

 

Just imagine if you are 5 or 10 years away from retirement only to find out that you will be $74,517 short on your retirement.  The original $50 savings will need to be $1,014.15 per month for 5 years at an 8% annual rate of return to reach your goal.  A great deal of planning may save you a lot of heartache later in life.  Speak with your financial professional today to understand more about saving for your goals.

 

 ”Compounding your money over time can add up to a hefty amount.”

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Save, Invest, Repeat

November 18th, 2011 | Posted by TRAVIS T SICKLE, CRPC®, AAMS® in Financial Planning | Investments - (0 Comments)

“I want that!”

“No, you can’t afford it.”

“I want that!”

“No, you can’t afford it.”

How many times have you heard these words?  Now how many times have you had this conversation with yourself?  Just like the Beatles song goes, “You can’t always get what you want,” definitely plays true when you are dealing with financial goals.  Savings money is tough work.  It takes a lot of dedication.  And you have to actually stick with it.

Saving money is a lot like working out.  You can go to the gym and just start lifting weights day after day and hope you get the results you want in the time allocated.  Or you can sit down, draw out a game plan, follow it and track your progress.  Now which plan do you think is more likely to be successful?  Saving money is not much different.  It doesn’t really matter which financial goals you’re trying to achieve, having a financial plan may help increase the odds of your success.

Saving for shorter term goals like a new car or vacation tend to be simpler because saving $2,000 will most likely result in actually setting aside $2,000 over the course of a few months or a year.  That’s because you are most likely going to invest in shorter term securities like 3-6 month CD’s and money market accounts.  On the other hand, saving for long-term goals such as retirement requires a more complex allocation of funds.  The asset allocation mix, target rate of return and tax status play a much larger role in affecting your ability to reach these goals.

It’s about learning and understanding what exactly you need to do to achieve your goals early on that has the potential to significantly increase your likelihood of successful financial planning.  The elephant in the room isn’t the target rate of return, which most often may feel like it’s more out of your control than within.  Instead, do a little more research on risk and your risk tolerance.  You’ll help yourself manage the emotional roller coaster that often comes with investing.  After all, knowledge is power and will help you to better understand your savings strategy. Next you should focus on your ability to save and into which tax advantage accounts like 401ks and IRAs will be most effective in your situation.

Saving and investing is not the quick fix to your financial woes.  It’s a strategy that when applied appropriately can often prove rewarding over the long haul.  There are certainly no guarantees when investing in the stock market or various other securities.  Speak with a financial professional to help ensure that your saving and investing strategy is right for you.

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