go back and make a brand new start, anyone can start from now and make a brand new ending.
Great love affairs start with Champagne and end with tisane.
Hopefully, we have convinced you that you will be best served relying only on yourself for your retirement and that the investing wisdom of the 1980s and 1990s is no longer going to deliver the same types of results. Saving and investing for your future is a lot like ice skating for the first time – you can feel a bit unsure and wobbly at the start and it can take a bit more effort than expected, but once you get some momentum going, it can get a lot more comfortable and natural. So, where to start?
First Step: Saving
How's that for a topic heading to make you groan and skip ahead to the next section?
Saving: It is a dire imperative but calls to mind excruciating lectures by Mom and Dad accompanied by profuse finger-wagging and a desperate desire to stick one's tongue out – or maybe that's just us, but you have to admit spending can be fun. Out of respect for you, the reader, we'll make this as quick and painless as possible.
There are three types of savings, and everyone needs to have at least the first two of these three:
1. Emergency fund
2. Retirement savings
3. Special-purpose saving (buying a home, college for the kids, that dream vacation, man cave, or fantasy shoe closet, etc.)
Most financial advisors typically recommend stashing away at least three and preferably six months' worth of living expenses for your emergency fund. If your income tends to be more volatile, consider having closer to a year's worth. This isn't the “I-seriously-need-a-vacation-from-my-insane-boss emergency fund,” but rather, savings intended to protect yourself in case of an unexpected loss of a job, a medical emergency, or an unanticipated home or auto expense.
According to a Bankrate.com study released in mid-2015, 29 percent of all Americans have no emergency savings, and of those who do, just 22 percent had “enough to pay for at least six months of expenses.”6 That's a big problem, because according to the National Endowment for Financial Education, about 60 percent of adults experience a financial emergency each year, 20 percent experience an unexpected transportation expense in a given year, 19 percent report having an unexpected home repair or maintenance issue, and 16 percent have unanticipated medical bills for an injury and illness. Medical debts account for about half of all the accounts in collection among U.S. adults.
Simple enough? You need emergency savings. Make it happen. Enough said.
As for retirement, the first question is, how much do I need to save per year? This is a question a lot of people ask themselves. Searching the phrase “How much do I need to save per year” in Google gives about 433 million results (we checked), so there are a lot of opinions out there. MSN Money has a great calculator to give you an idea of how much you need to save per month given your current income level, how much you already have saved, when you want to retire, and how long you expect to need your savings to last during retirement.
We recommend looking at a few of these various guides/calculators to get an idea of where you stand. The easiest way to put your savings plan into action is to actually have, somewhere, a separate bank account, for example, to sock away your current nest egg and to move funds every month. There is something rewarding about being able to see your retirement savings growing month after month. The best way to fund it is by having money automatically put into it every month, withdrawing from perhaps your day-to-day checking account. However you choose to do it, make it a consistent habit.
Sometimes, despite the most carefully crafted plans for the future, life can throw a curveball and you find yourself someplace you never expected to be, dealing with problems you never would have imagined. Bob, whom you met in Chapter 1, asked Lenore to meet with his daughter as she was dealing with a painful situation, one to which Lenore could unfortunately relate.
Sophia – Rebuilding a life and a plan for the future
Lenore met with Bob's daughter for dinner a few days after she had run into him, literally, at the UPS store. After commiserating about their failed marriages, Lenore tried to get a smile out of Sophia. “My marriage was also all about compromise. My ex got his way and I learned to live with it! After an argument with him, the only way I could keep my spirits up was to come up with a really great comeback. Unfortunately, one usually didn't dawn on me until a few days later!”
Sophia was in such a glum mood that the best she could do was a short laugh that was more of a hiccup. She mused, “Nothing has turned out the way I expected it to.”
Lenore told her, “I know what you mean. Seems that they rarely ever do, but sometimes what I get ends up being better than my own plan… Not what you want to hear now, though, is it? I hate it when people give you the, ‘This will be such a growth opportunity’ speech when all I really want to do is feel awful. Relationships seem to me to be a lot like algebra. I look at my X and wonder Y.”
Understandably, Sophia groaned and rolled her eyes. Frankly we can't blame her.
Lenore laughed and told her, “Sorry, bad puns are a familial genetic defect. Now that you and your ex-husband have split, you can explore a life full of unexpected stories, some of which you hopefully won't be able to share,” trying to coax a smile out of her. One of the great things about having something blow up so spectacularly is that you can cash in all that sadness for a ticket to do something you never thought you'd have the courage to do. If you were ever going to really shoot for something beyond your wildest dreams, why not go for it now?” she continued encouragingly, “Let's just make sure that before you go cavorting around the Tuscan hills writing the next great novel or becoming the next Picasso, your finances are in order.”
After Lenore painted that picture, an awkward silence ensued while Sophia's eyes remained glued to the tabletop.
Lenore silently chewed her cheek, thinking of how to best navigate the minefield she'd apparently stepped onto. She asked, “Did your husband handle most of the finances for you two? It's pretty standard for one person in a marriage to handle it all.”
Sophia let out a big breath, but continued to avoid eye contact while fidgeting with the wine list. Lenore stared awkwardly into her water glass, trying to think of some way to help Sophia feel less vulnerable. There is nothing like a painful divorce and the realization that you're not sure how the hell you're going to manage your life going forward to make a mess of one's sense of self-worth.
Being human is just not easy at times. There are days that we both wish we had our respective dogs' lives, being told daily how wonderful we are, plenty of head rubs and getting to feel exquisite joy from something as simple as the sound of a leash being picked up or the tail-tingling sight of a tennis ball.
Lenore stopped chewing on her cheek and asked, “Sophia, how about this? If you would like, you could come over to my office next week and we can go through your finances and figure out how to get everything in order so you know where you stand. I'm guessing that you are feeling totally overwhelmed and don't know where to start. My partner Chris and I can help. Let me know if you feel up to it. Most importantly, which bottle of wine shall we order? I think we need something special to toast the start of your next chapter in life. If you are up for it, it could become a real page-turner… So what do you think of the salads here? I'm trying to get back into bikini shape, but so far the only
