Investing and asset value is something we all are pursuing. Unfortunately, we are also our own worst enemies because we fail to put off unnecessary expenses. We fail to invest a little in a reasonably risk free equity because we don’t have enough to invest. We conclude that the time has past because we missed the larger opportunity. Finally, and most damaging of all we conclude we are too old or too far along to begin again.
How often do we consider that for a college graduate at 50 years of age you have at least 20 good years of work and income production ahead. For most, by the time we are 30 we have achieved reasonably significant income capacity, but we have little asset value accumulated. In essence, we may have a small savings, the clothes on our back, a car payment, and perhaps a small retirement account. However, at 50 if we have to begin anew our income capacity is perhaps 2X to 4X what it was at 30. Our children are out of the house or soon will be and our expenses may be at the lowest point in 30 years. Also, much of the time, we have already taken the big trips, seen the sights, and our needs are much simpler. PLUS, we have the added value of much accumulated experience which if applied judiciously can eliminate a lot of risk, provide a lot of opportunity, and position us for great prosperity in a short period of time if we are patient.
Unfortunately, we get caught up in the charts and graphs about the time value of money and begin to fear our time has past.
A different course should be pursued. If you are buried under a mountain of debt, realistically can you manage it? If not, then retain credit support and start renegotiating (there has never been a better time). You may even find on closer analysis that you have to take the bitter step and declare bankruptcy. Your credit will take a hit and perhaps even be a temporary casualty, but this is about getting on the right track and is not about maintaining your credit score. Also, do we really need debt? The odds are good we can meet our needs and improve our position living debt free.
At the same time, look carefully at your costs. Downsize and minimize. Can you make changes to reduce your travel costs? Perhaps you have club memberships that should go? Are you dining out too often? In short reduce the expense side of your life.
Now, the most important step. Begin investing seriously and very conservatively. I do not recommend bonds. I recommend businesses (rental real estate or funds) that consistently in down economies and strong economies show profits and growth. Of course, even growth industries can take a step back on the value side from time to time because of economic down turn (the key is consistent profits and dividends). However, if the investment has a long term growth curve and is a very conservatively operated investment stock, it will typically out perform bonds. Seek a return of 3.5% to 6% per year dividend yield on current cash value. Pursuing greater numbers is not sticking to the conservative approach I am suggesting.
Additionally, ensure the investments are income producing securities. By making this choice, you lock in annual income that will preserve your lifestyle in the future.
For a couple that makes $100,000 per year, $15,000 to $20,000 per year could be saved over 20 years. By 70, the investment could be $500,000 to $700,000 in cash value. Further, with today’s medicine, the likelihood is strong that you could see 5, 10, 15 years of productive work beyond the 20 years we are discussing and achieve 2X or even 3X the potential described.
As you can see, starting over using a very conservative steady approach offers significant opportunity and is not such a daunting task. By the close of 20 years, your nest egg will be producing $20,000 – $35,000 in income and be growing $15,000 to $40,000 as a gross asset. Along with social security, part time work, and other alternatives, you’ve secured your golden years.