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Climbing the Financial Ladder

Don't Miss A Step Climbing Your Financial Ladder. As I studied about digging myself out of debt and progressing towards financial success, a common list of steps emerged as I researched various experts.

  1. Get out of debt

  2. Build an emergency fund

  3. Save for retirement

  4. Save for kid's college ONLY after your own retirement savings is on track

My addition to the common "vanilla" items above is that I have calculations to retirement saving and kid's college saving as opposed to a one size fits all age.


   1: GET OUT OF DEBT: Most people have a desire to become wealthy, whether it is to say "Take this job and SHOVE IT" to their boss, buy luxurious things, give it to others, defend against life's surprises, etc; many people want to build wealth. 

So why do so many people swipe the credit card and take out huge loans? Most people go to college in order to increase their chances of becoming wealthy, but the first thing they do is take out a student loan that will take more than half of their working life to repay. Going into debt is the OPPOSITE of building wealth. Every time you sign a loan or swipe the credit card, you go into debt. 

Stop doing it!!! Since your plan is to pay for it later, you would be much better off saving up the money and buying the item after you have saved the money rather than before. If the debt would have been 10% interest, but instead you save at a 10% return, you end up paying 20% less if you save up the money to buy than if you borrowed the money to buy. This is why rich people continue to get rich; they effectively pay less for items than the rest of us because they don't borrow. 

And we haven't even gotten into the risk part of debt yet. If you save money to buy something there is no risk of getting screwed. If you borrow money, there is always the chance you might miss a payment, or the bill gets lost in the mail, or your check gets lost and WHAM your interest rate goes up through the roof. I have actually heard people say the way to get rich is to use credit cards and collect the perks. Thinking you are going to outsmart these credit card companies is like thinking you are going to commit a crime and escape the police; you are playing a game that is designed for you to lose. Don't go into debt. If you are in debt, get out of debt as fast as a gazelle from a hunter, or a fowl from a fowler..? ;)


   2. BUILD AN EMERGENCY FUND: Because let's face it, Life Happens. 70% of US families are just one paycheck away from foreclosure and bankruptcy because they have no emergency fund; in other words, lose your job lose your house and car and everything else. An emergency fund is typically three to six months of expenses. If you have a very reliable income, perhaps three months of expenses is okay for your emergency fund, but if you have unreliable income or are very risk averse, then you might want six months or more. If your emergency fund is too big, you are missing out on investment and growth opportunities. If your emergency fund is too small, you might not be able to cover all of life's unexpected and expensive surprises. 

The money should be kept in an account where it can be accessed instantly and there is little to no chance of it decreasing in value. This means no CD's, mutual funds, stocks, bonds, ETFs, as these either take too long to cash out or have too much risk of decreasing in value. A money market savings account is the most common choice for an emergency fund. 


 3. SAVE FOR RETIREMENT: Because most of us do not want to work forever. Many people unwisely rely on social security for all of their retirement needs. Social Security benefits have a long history of declining benefits; at the time this post is written, social security income will you put you at poverty level. Corporate pension funds are failing and social security is underfunded. This means the best person to prepare for your retirement is you. No more putting this important responsibility onto the government or a company you no longer work for. America was founded by people who wanted to be responsible for themselves, and this means you need to prepare for retirement. 

Are you ready to learn how easy it is to prepare for retirement?If you invest $4 per day from age 22 to age 65 and get a 10% return, which is the market average, you would retire with over 1 MILLION DOLLARS!!! Why doesn't everyone retire a millionaire???

The first step in saving for retirement is to identify your inflation adjusted savings goal. The #1 mistake most retirement advisors make is that they do not account for inflation. Inflation will cause prices to triple during your retirement and as prices go higher and higher, inflation is making your retirement goal higher and further away. So how do you identify where this moving retirement target will be when you get there? You can use the retirement calculator  to avoid a series of really nasty equations. 

Adjust the investment rate or returns to not only identify your inflation adjusted retirement goal but also the rate of return you need to achieve success.

Next, you need to identify the best way to achieve that rate of return. Do you prefer to hire a financial advisor? Most advisors achieve 6% - 8% Real Life Trading has identified a few advisors that can achieve, 10% - 15% or more depending on your risk profile. We would be happy to share these advisors' contact information with you for FREE. Shoot me an email anytime at brad@reallifetrading.com and I'll fill you in. 

Many of our Real Life Traders  have received education and training on the market can achieve 30% or more per year regardless of market direction. I know many traders who make over 100% each year. Join the revolution at Real Life Trading and learn how to trade stocks, options and more for FREE!

Most Real Life Traders feel that you should hire a financial advisor while you are learning to trade the market. You should start trading with virtual money and then with small amounts of real money. Once you can steadily outperform your advisor, then you can consider taking over management of your retirement funds. My family has chosen to use financial advisors for our retirement needs while I trade for our retirement wants and dreams.


4. Do not sacrifice your retirement savings in order to pay for your children's college expenses: The reasons for this include the following: "50% of college students drop out for unforeseen circumstances." You can't sacrifice your retirement on a 50/50 chance your child will not finish school.

"College seniors are facing 50% unemployment." Your child will have enough stress getting established without having to worry about paying back his/her parents' retirement.

"College students who pay part or all of their education study more and learn more."  They also learn how to budget and handle money, which is the most important life skill to develop financial success.

In short, your retirement is your responsibility. Do not burden your children with your retirement arrangements that you should have handled yourself. These are just four rungs on most people's financial ladder. Just like climbing a real ladder, it is very important not to skip a rung or you can fall down and get financially hurt. What good is a fully funded retirement fund if you lose your house, car and other possessions because you failed to have an adequate emergency fund. Want to learn more about why Getting Out Of Debt is GOOD? Want to learn more about the other rungs on the financial ladder? Want to learn more about trading stocks and options and more? All for FREE? Check out my Financial Fundamentals course here.

Be GOOD & Trade on logic, not on hope

Brad Reed

Brad@RealLifeTrading.com

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