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The Value of Money
By Kevin Spafford, CFP®
Founder - Legacy by Design, LLC
A long time ago in a distant land, a wise man was traversing the desert. As he paused in the midday sun to rest his camel and avoid the searing heat, he heard a voice call out to him in the wind. It told him, “Fill your pockets with sand and in the morning you will be both happy and sad.” With hesitation he bent over and filled one pocket then another. So as not to overburden his already tired camel and not to inconvenience himself too much he filled only two…
In the morning he awoke to find the sand had turned to gold. As he reflected upon his fortune, he was happy for the amount he had but he was sad he did not take more.
So it is with retirement savings. Most people approach retirement with trepidation. They hope they have saved enough money, yet as they look back wonder if it could have been more. Retirement is not a surprise event or unexpected calamity. We have years of warning and decades to prepare. So why do so many people fail to sufficiently plan, and financially prepare, for this inevitable and much anticipated transition?
For many, I believe it is a misunderstanding of what money is. MONEY IS MERELY A SYSTEM OF BARTER. No more and no less. It maintains a relative value in our society to facilitate trade. It could be stones, beads, clam shells or any other distinctive object. Money is a tangible representation of value.
We confer money with mystical powers and legendary strength - not recognizing that we are in direct control of how much we earn, when we earn it, and what we do with it. Money is earned through hard work; you trade your labor, time, and abilities for dollars. It is earned by ideas; a person trades plans, systems, or improvements for value. It is earned by investment; dollars invested today earn a return for the corresponding risk assumed by the lender/investor. Money is acquired and accumulates only where understood.
The accumulation of retirement funds is really a very simple process. It begins with a solemn commitment to that person you will one day become. Aging is as much a part of life as breathing. As we become frail and less able to work, we must rely on the money we’ve sent ahead for our financial well being. With that in mind, how much will you need?
In fact, that is the first step in the retirement saving process. How much will you need to maintain your standard of living during your retirement years? The two variables with the most potentially devastating impact on this figure are inflation and life span. Inflation is the silent destroyer endlessly functioning to undermine your investment nest egg. Life span is like the proverbial blessing and curse. We all desire a long and satisfying retirement, yet the unknown variable of how long you are going to live may require an income to stretch over two to three decades.
Where to invest is not a question of which institution, rather more correctly in what type of retirement vehicle or savings/investment instruments. The choices available to you are infinite. With modern investment vehicles, and the never-ending permutations and combinations, selection can be a daunting task. The important point is to start. You may want to consider tax advantaged methods and a reasonable model of diversification. If you do not feel comfortable in the investment world, there are multitudes of professionals to assist you in the process.
How much you invest depends on your retirement objective, the timeline you use for investment, the risk you are willing to assume, and the spendable cash you are willing to forgo today. Part of today’s earnings should be earmarked as an obligation for your tomorrow.
The magic of money is you. The discipline you apply to saving and investing may be the difference between a satisfying retirement and poverty. In a world gone mad with consumerism, home equity loan schemes, and play now/pay later vacations you must be ever vigilant in your responsibility to accumulate and maintain a retirement nest egg. Can you forego a material expenditure today to enjoy a more satisfying life in the future?
Consider the wise man’s lesson - how will your own story go?
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