|
Although everyone
appears to be an expert at amassing a personal fortune, most people aren't getting
the job done. The recent census figures show that 49% of males age 65 and over have
incomes of less than $25,000 a year.*
People seem to be able to save for short term needs, but not for the future. Most
of those doing the job do so by building the net worth of their businesses. Their
talent is that of building businesses, not in accumulating wealth. In analyzing hundreds
of situations, we have discovered that almost all large personal net worth comes
from those who first earned large incomes. Only a handful did it through medium incomes
plus judicious or lucky investments.
Few qualify as professionals by taking two hours or more per day to study the market,
even though their main occupation may be unrelated. This is difficult because surveys
show that in order to generate a large income in most occupations; a 68-hour work
week is the rule rather than the exception.
The successful completion of any investment program depends upon a person having
money to invest. Even though we can often borrow the money for most investments,
we still need money of our own. The more we have to invest the greater the return
in "DOLLARS".
The difficult step is the first one --- the decision to save money for investment.
The decision must be backed with action. The amount to be saved must be significant
or there won't be much capital to invest. Make the amount definite --- somewhere
between $200 to $2000 per month. Your desire must be strong or you won't convince
yourself to save. As an economist would say, "Your propensity to save must be
stronger than your propensity to consume." A burning desire to save is the cornerstone.
We must realize the positive results of saving and contrast them with the negative.
How can you visualize what you wish to accomplish? Try this method. Surveys show
that people have four financial objectives. These differ from person to person and
from occupation to occupation only in amount. These financial objectives are:
1. To have
an adequate standard of living for our families and ourselves today.
2. To have an adequate standard of living for our families if we are not here
to provide it.
3. To have an adequate reserve for financial opportunities and emergencies.
4. To assure ourselves a comfortable retirement income for old age.
There are various
viewpoints on how to achieve these objectives. Some people do not want to risk their
savings in non-guaranteed investments. Others don't mind a small risk. The "Dreamers"
just hope that everything will turn out all right. The answer is that you must have
a "System." A systematic plan seems wiser if one takes the time to grasp
the wisdom of
Parkinson's Economic Laws:
1. Work expands
to fill the time available.
2. Expenses rise to meet income.
3. The more complex, the sooner dead.
Application of these
laws to your personal situation might go like this. Suppose you have a business or
profession in which you have four employees. All are busy, according to Parkinson's
first law. If you eliminate one employee, your important work will still get done.
The savings in salary from that eliminated employee will enable you to save that
much more money.
As your income increased over the years, so did your personal expenses of operating
a home and supporting a family. It appears impossible to stop this expense factor
from equaling your income. You can handle this by cutting your spendable income by
the amount of your savings. You save first, then let Parkinson's second law operate
with the balance of your personal income.
Parkinson's third law is very subtle. Any elaborate scheme for savings or any method
of trying to oppose Parkinson's laws becomes so complex an effort that it doesn't
work. Any system of using all borrowed money to become a capitalist becomes complex.
Soon you begin spending most of your time borrowing from Peter to pay Paul in order
to keep out of financial trouble.
The foundation of financial success is capital savings - the basic meaning of capitalism.
Capitalism is too demanding for most people. The meaning should be clear enough without
amplifying with an economist's vocabulary.
The beginning problem to be solved is how to motivate people today to save for the
future, especially if their income seems sufficient so that they need not worry about
food, clothing, shelter and education. How about acquiring the motivation to be a
financial success as an end in itself?
Some people require the motivation of a definite need in order to save money. The
opportunities and emergencies that they can't foresee are to them nonexistent possibilities.
If this is the case, let's examine some good logical and emotional motivations.
For example:
Assume that you are
age 45 and will earn $50,000 per year. Chances are that if you are earning $50,000,
Parkinson's second law (expenses rise to meet income) already is in effect. Parkinson's
second law (expenses rise to meet income) already is in effect.
Also, assume that you want to become financially successful beyond your present earning
ability. The most difficult step is that of saving 10% of your gross income, approximately
$5,000 per year. Suppose we anticipate age 65, 20 years from now, you earn 5% compound
interest after taxes. You'll end up with $173,596 in cash for your old age. This
reward is usually not enough for most people to postpone today's spending in order
to save! How about you?
For most of us, creating
a savings plan and sticking to it are worlds apart. Our experience has shown that
people who have accumulated a great deal of cash and investments are those that are
very disciplined. If you are not disciplined when it comes to handling money, what
do you do? Give up, NEVER! There are many investment vehicles today that enable
people just like you and me to save and invest without much effort. All it takes
is discipline and commitment. Remember, FOCUS BEATS BRILLIANCE EVERY TIME.
It's more fun to be positive than negative. Let me show you how accumulating
cash can be done systematically without stress.
Sincerely,
David
I. David Cohen, CLU ChFC LUTCF
(1) The financial analysis
and recommendations are not intended to replace the need for independent tax, accounting,
or legal review. Individuals are advised to seek the counsel of such licensed professionals.
(2) Bureau of Labor Statistics
Agent, Insurance products offered through Signator Insurance Agency of Ohio, Inc.,
n affiliate of John Hancock Life Insurance Company, Boston, MA 02117 Registered Representative,
Securities offered through Signator Investors, Inc., Member NASD, SIPC, 6500 Busch
Boulevard, Suite 105, Columbus, OH 614-846-6000, 134-05052000-2959856
|
