by Vanessa Pagan
Like nearly all people on the planet, we all strive for financial security. However, in order to achieve our financial goals, we need to have a game plan. One part of that plan is trying to find a way to pool your resources over time so that you can avoid the temptation of living paycheck-to-paycheck. This is not a sustainable model, since you’ll eventually get too old to work and will have to find a way to take care of yourself.
For example, if you wish to get out of debt, you should figure out how much debt you have and then determine the amount you must pay each month in order to get rid of it. Say you owe nearly $3,000 in credit card debt and owe nearly $10,000 on a car loan, you will need to come up with approximately $1,147 a month in order to pay off these bills in a reasonable amount of time
Now, let’s say that you wish to help your child pay for college. Tuition costs, room and even board costs can exceed costs of up to $30,000 a year. If you want to save your child from getting into debt after they graduate, many states offer something called a 529 Plan. This plan allows you to take out a loan that is completely tax free. There are other outlets available out there to help you as well. For example, you can open a savings account called the Coverdell Education Savings Account which allows you to deposit up to $2,000 a year tax free.
We also have no problem recommending that you send your child to a state university or let them work while they are in college. Getting a job won’t kill them and to get ahead financially, you need all eligible hands on deck.
Now let’s say you want to save for retirement. Though your Pension and Social Security will certainly help to pay for your living costs, it is simply not enough. Also, the money is not as guaranteed as it used to be, as you can see in the city of Detroit, which is reducing pensions after it declared bankruptcy. In this case, you want alternative investment vehicles, such as a small business on the side, real estate, or simply investing a few dollars per month into an IRA or some other account that you can open up at your local bank.
The key point is that financial security NEVER means living paycheck-to-paycheck. The world is changing constantly, and financial security is tougher and tougher to obtain. While paychecks are shrinking, corporate America is pushing you harder and harder to consume. This is going to be very, very bad for your bank account. Don’t get caught up in the hype and set yourself up for a good financial future.