Save Something For A Rainy Day
I don’t know about you but I first started receiving retirement tips before I reached my teens. My mother was the professor of retirement tips at our household. Her primary advice boiled down to these words, always save something for a rainy day.
Save something for a rainy day sounds like great advice, at least on the surface. What it lacks are specifics. This article will give you the two most important retirement tips research and surveys have ferreted out for the great unwashed masses.
Believe it or not, planning for retirement is the first of the two magic tips. According to a large financial institution and a recent survey they ran, people who actually plan for retirement boost their savings dramatically.
By planning, they mean financial planning. As you might guess this tip is different than planning for a vacation for example. To save something for a rainy day means you plan financially or as commonly uttered, you financially plan.
If you are like most people you first shotgun your save something for a rainy day plan. In other words, you put money away but you don’t have an organized game plan. If the survey was correct you’ve been doing this for four or five years.
Let’s say you are one of those people. While you haven’t blown up your retirement, you may have set it back because that is lost time you can’t get back. However, on the positive side, while you may not have maxed out your return, you at least have started a save something for a rainy day retirement plan.
You can always build on this base. That means your retirement plan will now become more focused. It will have an account or two with dollar bills from which you can re-allocate your positions. This doesn’t mean you can now go on vacation and forget your retirement plan.
It means you have to construct it, finance it and manage it. Once you get to step three, manage it, you can go on vacation for two weeks. When you return, jump right back into the management phase and don’t let it slip out of sight. Remember, save something for a rainy day requires active management.
Magic tip number 2 is some sage advice you have been hearing for years. In fact, it has become so common place people often don’t even hear it when they hear it. Tip two says don’t put all of your eggs in one basket. Said another way, you should pay attention to and institute the principle of diversification.
For example, if you only put your money in CDs, don’t expect to have a gigantic pile of greenbacks waiting for you when you retire. CDs follow general market and savings rates. They have been both high and low with low as the dominant direction. CDs are not exactly a save something for a rainy day retirement vehicle.
Diversification means two things. The first is of course putting your money into more than one investment vehicle. The second meaning is the degree of risk you are willing to accept. Common stocks represent both of these meanings.
Contrary to popular myth common stocks have been steady performers for both appreciation and income in the form of dividends. If you are a risk adverse person but would like to have a steady cash flow in retirement, you would consider what are called blue chip stocks. These are companies that dominate their market and are likely to stay in a dominant position for years to come.
As for diversification in different types of programs, you may wish to consider an IRA or ROTH IRA or an annuity. There is other save something for a rainy day programs so consider these three as only suggestions.
Save something for a rainy day should be a walk in the park for anyone who is serious about not outliving their money once they reach retirement. On the other hand, if you are already into the save something for a rainy day mentality, you should have a good head start.
Using these “two words” in your 401k, IRA or any other investment account can make you very wealthy…
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