Lessons From a New Retiree

Albert Crenshaw, a long time columnist for the Washington Post on all matters financial, is retiring. We'll hate to see him go as he has given wonderful advice over the years to the average worker. While we haven't always agreed with him, for the most part, his advice has been sound. With his retirement, we want to feature his final column.

Today's twenty- and thirtysomethings, more than any generation since before the Great Depression, seem destined to be left to their own devices when it comes to reaching their financial goals and securing a comfortable retirement. People this age have time -- time to save, invest and build assets. But they must have the discipline to do it. And that's no small matter because, for many lower-paid workers, the necessary savings will require economic sacrifices throughout their careers. It won't be easy, but it can be done.

Wow, isn't this the truth? If you think that the government is going to be there for you when you retire, you are seriously mistaken. It is up to you and you alone to be ready for that day to come. Not only do you need to plan long term, but short term as well. It is very important that you be financially fit from a young age. Youth today think they are bullet proof, they aren't. Situations arise, illness, injury that can force an early retirement. Are you going to be ready? If instead of 65, you were forced to quite working at 45, could you handle it? Do you have resources in place? the bottom line is the time to start is NOW!

All those books and articles you see about squeezing everyday expenses to generate savings are right. Almost everyone who has a job can manage to save a little every day. Simply substituting a Thermos of home-made coffee (tea is even cheaper) for the $3 latte could generate $500 a year, a good start on an individual retirement account.

But while the savings strategies work, they work best if you combine them with serious investing.

Yes! You can find money out of you current income. Do you know where your money is going every month? If you take the time, and track where your money is going each month you will be amazed at the amount of waste there is. If you truly are someone who has no waste as you assess where your money is going you can determine if there are things less important then building your financial security and you could redirect your money. Without causing a serious change in your life, you should be able to find a few hundreds of dollars every month out of your current income.

So what do you do with this money? This isn't your new entertainment fund. Sorry. You use this money to first, build a savings account in case of emergency, second, you pay off ALL of your debts, yes, all of your debts including your mortgage. Any that have worked with us know our system. If not, feel free to drop us a line and we'll clue you in. Finally, after all those debts are gone, including the big bugaboo, your mortgage, you can then start investing. This is a sure fire plan and one that will swiftly take you from in debt to on top of the world!

It's fashionable these days, in an era in which many marriages break up, for couples to keep their finances separate. Two checks for the rent. Splitting the dinner tab. His and hers bank and investment accounts.

My experience is that couples who act as a single economic unit do better. Ideally, young married couples should aim to live on one salary and invest the other. Not only does that seem to result in faster saving, it compels the couple to confer about their spending and investment. It's not his money, not her money -- it's our money.

If a husband and wife can't agree on money matters, their chances of staying married seem to me highly problematical. Operating separately may sweep disagreements under the rug, but they won't stay there. Marriage is a lifelong economic joint venture, and like a commercial merger, it won't last long if the partners think they're in different businesses.

BRAVO!!! A marriage is a partnership, it should be the strongest one you have. If you have been lying to your spouse about money, STOP IT! You are in this together, both good and bad. You need to work together on it. There is nothing more pathetic than when a spouse dies and the one left has no idea about the money, how much is left, insurance, investments, etc. It needs to be done together. Money will rip a marriage apart faster than anything else; it can also be a reason for a strong union. When finances are worked on together and both know where all the money goes, a major focus of contention is gone and a major stress on the marriage disappears.

The things we buy fall into two categories: those that lose value or disappear, and those that gain value. Borrowing to pay for the latter -- a house, a college degree -- is a likely to be a winning proposition. Borrowing to pay for the former -- a vacation, a pizza on a credit card you don't pay off -- at best makes these items much more expensive; at worst it's money down a rat hole.

The moral here is not to fear debt, but to use it wisely.

You know, we knew there was a reason we liked this guy! Again, he hits it just right. How many of you are still paying for that steak dinner from 1998 you put on your credit card? Remember there is a big difference between Debt which is borrowing money to buy things that decrease in value and leverage which is using other people’s money to make money. To many judge their monthly out flow by how much income that is coming in plus available credit lines. This is false affluence and will only lead to financial ruin. Get your education and don’t confuse debt with leverage. Buy that house; just pay it off as quickly as possible. Go to that expensive restaurant if you have the cash or have the ability to pay off the card you are using. Don’t go if you have to put it on your card because you lack the cash. Eat in or find a place that you can afford. It is easy to rationalize and say, "Just this once..." but that turns into one more and another here and one there... it never ends. You are better off to never let it get started. Decide today to taking small steps that will over time dramatically improve your financial life.

We recommend the rest of the article to you as it is chock full of good advice. We wish Albert a wonderful retirement; his words of wisdom will be missed by all of us.