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By Jay Gershman, Retirement Visions LLC, West Hartford
Stop pointing the finger at the government, capitalism, and rich people and open up The Millionaire Next Door.
Smaller than anticipated tax refunds are dominating the news, and it’s true that refunds are lower – around 8 percent according to The Washington Post. But what strikes me as interesting is that while people become irate about less money in their pockets, they are also less prepared to fund an emergency or stay on top of their bills. In fact, recent headlines by CNN Money highlighted that 40 percent of Americans can’t cover a $400 emergency and the New York Federal Reserve Bank reported that seven million Americans are currently more than 90 days late on their car loans.
All of this in an economy that’s supposed to be thriving.
It would be easy to point to the wealth gap for our economic imbalance. The supposed culprit is usually hailed as out of control Capitalism and greedy corporations. Grabbing these headlines, politicians Bernie Sanders, Chuck Schumer, and Marco Rubio propose legislation that will discourage corporations from buying back their stock and encourage higher dividends.
Meanwhile, freshman Congresswoman Ocasio-Cortez proposed a 70 percent marginal tax rate while Bernie Sanders floated a 77 percent estate tax on billionaires. Unfortunately, it appears that these politicians have not read Thomas Stanley’s 1996 bestselling book, The Millionaire Next Door.
While admittedly, I have not re-read the book recently, Stanley discusses seven traits that the “people next door” have in common which allows them to accumulate substantial wealth while living normal, everyday lives. The strategies put into place, such as driving an older car for longer instead of leasing and taking on debt, are available to everyone, regardless of their income level and social status.
As a financial advisor, I have personally witnessed the disparity between a young worker who refused to contribute to a 401(k) and thereby missed out on a 3 percent employer contribution, while an older co-worker had amassed a $1 million account by the age of 60. It’s too easy to blame others for a lack of planning and preparation. It’s too easy to blame greedy corporations for taking care of shareholders and not employees. It’s too easy to blame rich people even though they are constantly asked to pay more state and federal income tax in addition to sales tax, social security, and estate tax.
However, it’s not difficult to make small changes to improve your financial situation and control your own fate. Here’s a list of 10 things anyone can do to turn small changes into large differences:
- Pre-plan your household food expenditure and use memberships to Sam’s Club, Costco, or BJ’s to save.
- Stop using your debit card and start building rewards points that can be used for travel or rebates.
- Review your cable and mobile phone bills regularly to reduce your monthly expenses. Try to stretch the age of your mobile phone to avoid an additional monthly fee.
- Pack a lunch to avoid the expense of eating out often.
- Drop an expensive habit. Reduce or eliminate your consumption of cigarettes or alcohol and say goodbye to gambling, boating, or country clubs.
- Add just a little more of your pay to your 401(k). Remember, being a 401(k) investor makes you a shareholder who benefits from those “greedy” corporations.
- Be sure that financial risks are minimized by having enough life and disability insurance.
- Buy a used car and hold onto it for longer. Enough said.
- Keep your debt under control and build a two-month cash reserve. Start by tracking your debt and reward yourself for progress.
- Don’t rationalize your bad behavior by convincing yourself that you won’t live to see retirement. Being wrong can be painful.
Here’s the bottom line. The problem isn’t Capitalism. The problem isn’t taxes. The problem is you and the solution is within your control. Regardless of your current financial situation, small changes can move you towards being the quiet, wealthy neighbor who will live comfortably for the rest of your days.
Jay Gershman is the Owner and Founder of Retirement Visions LLC, a West Hartford-based financial planning firm that focuses on comprehensive life planning and financial management. For more information, visit www.allset2retire.com. Information and advice are for guidance only and opinions expressed belong solely to the author. Securities offered through Securities Service Network, LLC. Member FINRA/SIPC. Fee based services are offered through SSN Advisory, Inc., a registered investment advisor.
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