Stages of Life Money Management

The stage of life you are in will determine the financial management strategies you should employ. A financial management strategy for a 30-year-old single person will be different from a 30-year-old married person.

Likewise, the 30-year-old has vastly different financial goals and responsibilities compared to a 65-year-old.

There is never, nor can there ever be, a one-size-fits-all financial management strategy or plan. Stages of life, lifestyle differences, individual circumstances and objectives require a personalized strategy.

Early Career Years

Typically, this will begin after graduating from college or some other type of specialized training. During this time, it is common for your expenses to exceed income. As a result, you can easily become burdened with debt that take you years to pay off. Obviously, you don’t want debt to control your life. Some goals for this life stage may include:

  • Paying off student or specialized training loans
  • Buying a car
  • Buying all the household furnishings needed for your rented home or apartment
  • Starting a savings and investment plan
  • Developing a good credit history and score

Right from the start you need to track your expenses and have a budget. This is the only way you can really learn financial discipline.

You must establish an Emergency Fund equal to 3 – 6 months of your expenses. This will be your cash reserve to pay for any number of unforeseen financial setbacks that will come your way … and they will come.

This is also the stage in life when you will most likely be looking for a life partner. Both partners need to be fully aware of the financial situation of the other partner including income, personal expenses and debt. It is also important to know the financial philosophy of each other. (Is one and saver while the other one is a spender?) There needs to be some brutally honest discussions so both parties know exactly the philosophy and spending habits of the other partner.

If you are single and it appears you will remain single for a few years ahead, you are in a perfect position to aggressively save and invest. Doing this will put you decades ahead of your peers. I promise that you’ll never regret it.

Career Advancement and Family Years

This stage in life will be your most challenging in maintaining financial discipline. As you grow in your career, your income will grow. Your financial responsibilities will never be greater. This time in your life will provide you with memories you will never forget. Some financial objectives at this stage of your life may include:

  • Saving for a down payment for your first home
  • Buying a home
  • Growing your savings and investment accounts
  • Building an education fund for your children
  • Putting money aside to start a business

If you have a family, you must have:

  • A will
  • Life insurance

If you are single, you need to have a will and a plan if you become seriously disabled or of your premature death. Someone needs to be appointed to handle and disburse your estate. I recommend using an estate attorney.

Empty Nest Years

These are the years after your last child has moved out of the household and retirement. This is the stage that you (and your spouse) focus all your financial strategies and resources towards a financially secure retirement. Some areas to consider are:

  • Aggressively increase your deposits to your savings and investment accounts. It is far better to run out of life before you run out of money than to run out of money before you run out of life.
  • Pay off all debts before you actually retire
  • Develop a plan for long-term care (insurance, savings, etc.)
  • Make sure your will(s) are in order based on your wishes

Two years before your planned retirement date, you should develop a budget based on your anticipated monthly retirement income. The purpose is to have all the “kinks” worked out of your budget so you can confidently enter retirement knowing that you can comfortably live the lifestyle you worked all your life for.

Retirement Years

You made it! This is the stage when the money you saved and invested throughout your working life will take care of you. Some considerations at this life stage are:

  • Minimizing taxes
  • Finalize your will(s) and estate planning

With your financial advisor, annually review and make any needed changes to your savings and investments to make sure they will continue to provide the needed income for as long as you live.

“We work all our lives so we can retire – so we can do what we want with our time – and the way we define or spend our time defines who we are and what we value.”
– Bruce Linton

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Fixed Rate vs. Variable Rate

“It’s not how much money you make,
but how much money you keep,
how hard it works for you,
and how many generations you keep it for.
— Robert Kiyosaki

Will your savings and investment plan make more money in 5 years with a fixed (guaranteed) rate of return or a variable rate of return when the fixed rate equals the 5-year average rate of return?

Shouldn’t the results be the same in 5 years? Let’s take a look at a comparison.

Example Assumptions
Beginning Balance: $0
Monthly Deposit: $500
Accumulation Period: 5 Years
Average 5-Year Rate of Return: 5.2%
Withdrawals: None
Taxes: Not Included
Inflation: Not Included

Fixed (Guaranteed) Rate of Return Result (5.2%)
Account Balance at the end of 5 Years: $34,257

Variable Rate of Return (Average = 5.2%)
End of Year 1 at 5% Rate of Return: $6,300
End of Year 2 at 3.5% Rate of Return: $12,731
End of Year 3 at 7% Rate of Return: $20,042
End of Year 4 at 4.5% Rate of Return: $27,214
End of Year 5 at 6% Rate of Return: $35,207

Your money will earn $950 more with a Variable Rate plan.

This example clearly shows that while a guarantee provides safety, accepting some risk will typically earn a higher Rate of Return over a period time.

The quickest way to double your money is to fold it in half
and put it in your back pocket.”
– Will Rogers

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What Is Your “Real” Rate of Return?

Image by Steve Buissinne from Pixabay

“The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.”
— T.T. Munger

Definitions and Example

Rate of Return is the ratio of the annual income from an investment to the original investment, often expressed as a percentage.

Real Rate of Return, also known as the “net” rate of return, is the gross annual income from your savings and investments (S&I) less taxes and inflation. The equation looks like this:

Income from S&I – Taxes – Inflation = Real (Net) Income and expressed as a percentage.

S&I Beginning Year Balance: $100,000
S&I Ending Year Balance: $107,500
Gross Income Earned : $7,500
Gross Rate of Return on S&I: 7.5%

Taxes of 20% on income earned: $1,500
Inflation of 2% applied to year-end balance: $2,150
Real (Net) Income for the year: $3,850
Real (Net) Rate of Return on S&I: 3.85%

The above example clearly shows why you need to use Real (Net) Rates of Return when making long-term S&I plans and commitments. You also need to set a “target” for your real rate of return in your funding and planning strategies.

Your target Real (Net) Rate of Return will help you determine what types of savings and investment products to utilize. In general, the higher your target, the more risk you must be willing to take.

Risk, Reward and Balance

Types of Savings and Investment products

High risk: Below investment grade bonds or bond mutual funds. Stocks or stock mutual funds of start-up businesses. These offer the potential of high rates of return. You also stand the risk losing some or all of your money.

Average risk: Stocks, stock mutual fund, S&P 500 indexed funds, investment grade bonds and bond mutual funds. Returns are not guaranteed. However, over periods of 15 years or more, stocks and stock mutual funds have performed quite well against all other types of investments. S&P 500 indexed funds offer some stability over individually owned stocks because of the number and diversity of the companies included in the S&P 500.

Real estate also has the potential to provide good returns.

Low risk: Includes bank or credit union savings accounts and certificates of deposit. Accounts (up to a certain amount) are insured. Interest rates on certificates of deposit are guaranteed. Unfortunately, the current interest rates for these accounts are typically less than the inflation rate. This means you are guaranteed a loss of the purchasing power of your money.

Balanced S&I Portfolio

The surest way to get caught with your financial pants down is to:

  • Seek the highest interest rate
  • Seek the highest rate of return
  • Putting all of your money in one basket

This doesn’t mean you shouldn’t compare products and services. Just remember that if it looks too good to be true … it probably is. Do your due diligence research.

Your savings and investment portfolio needs to be balanced between high-risk and low-risk products. Your S&I portfolio should contain guaranteed and non guaranteed products.

Don’t be greedy. Don’t get starry-eyed. Rather, have a balanced, well-funded and planned S&I portfolio. Review it annually and make any needed adjustments.

I am not a financial planner or investment advisor. Please seek professional counsel for personal advice and recommendations based on your specific, personal objectives.

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Does Your Financial Savings Plan Account for Inflation?

Image by Foto-Rabe from Pixabay

“We should be disciplined and responsible and then our prosperity will be stable despite any economic crisis, inflation or a change of government”
― Sunday Adelaja

Let’s assume you have established a savings plan to reach a specified amount of money down the road. You have it all planned out as to how much money you need to save each month to have that amount of money in 15 years based on a realistic interest rate or rate of return after taxes.

I congratulate you on your savings commitment!

There is a problem, however. Due to inflation, your savings target for 15 years down the road will not be enough.

Inflation will erode the purchasing power value of your money … year after year. Let’s say there is an inflation rate of 2% this year. This means that next year your dollars will be worth 2% less than this year. To make up for the deflated value of your dollars, the item that costs $100 this year will require you to fork over $102 next year.

A dollar still equals a dollar. You will simply have to allocate more dollars for the same item or service next year.

Let’s take a look at a hypothetical illustration. The components like the assumed interest rate and the inflation rate in the illustration aren’t all that important as the purpose is to simply illustrate the concept. All assumptions are for illustrative purposes only and may not be relevant in today’s marketplace.

Initial savings …. $10,000
Monthly deposits …. $499
Annual interest rate (APR) …. 2.5%
Years to target date …. 15
Average annual rate of inflation …. 2%

Summary Results
Total deposits …. $99,620
Interest earned …. $24,724
Gross future value …. $124,544
Purchasing power value …. $92,538

Over the next 15 years, you will lose $32,006 in the purchasing power value of your money!

If you don’t increase your monthly contributions each year to offset inflation, the amount of money you will accumulate will be substantially less than you hoped for or need.

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The Value of Quality

“Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.”    
Peter F. Drucker

Being frugal isn’t limited to just saving money — it also means not wasting your money and spending your money wisely. Some things may be cheap now, but actually cost you more in the long run. There are times when it just makes sense to spend more now for a long-lasting, dependable, well-made product. To help you determine this, you might want to ask yourself some questions:

  • How long do you need the product to perform based on the frequency you will use it?
  • Will this product actually be able to do what you intend to use it for?
  • Do you need a larger, sturdier product to make the work easier?
  • Based on the price of the product, is the cost vs. the use value (including the ease-of-use) worth it to you?
  • Are you skilled to use the product for the work you will be doing?
  • Are you safely comfortable in using/handling the product?
  • Is there any training available if you need it?
  • What is the guarantee/warranty of the product?

Balancing Quality and Cost

Rarely is it advisable to purchase (and use) a poor quality product. In most cases, you will become frustrated in getting the product to perform to a reasonable degree of satisfaction. You also stand the risk of the product breaking down or falling apart before your job is completed.

That leaves us with choice of either buying a good quality product or a high quality product. Certainly, the cost difference will be a determining factor. Hence, taking a look at how important the product is to your life and how often you will use it needs to be a determining factor as well.

If you will use the product a couple of times a month, a good quality product will probably suffice. If you will use the product daily and it is important to your daily life, you need to buy the highest quality product you can afford.

Low to moderate use — Buy good quality
Frequent use — Buy high quality

Personal Examples

  • Before I retired, I typically drove about 65,000 miles a year for the business. I usually drove my car for 3-4 years before buying a new one. I was often on the road late at night. Because of this, I drove highly dependable Japanese cars with top-of-line tires. The last thing I needed was to broken down on the interstate at 11:30PM out in the middle of nowhere.
  • Computers and printers where critical tools in my business. I learned the hard way that personal use computers and printers (even top-of-the-line) where not designed for heavy office use. They didn’t last a year. From that point on, I purchased commercial-duty computers and printers.
  • In 1969 when I was 12 years old, I started mowing lawns to earn money. I mowed 10-12 lawns a week. One of the tools I used was grass shears to do the trimming and edging. I can remember today, just like it was yesterday, buying the only pair of grass shears I ever purchased. They cost $12.49! That was a major expense for me. I had to mow and trim two lawns (about 2.5 hours each of work) to pay for them.

    As it turned out, they were worth every penny I paid for them. I’ve used these Corona grass shears for 51 years every time I mowed a lawn. These grass shears were an important part of my little lawn mowing business. I bought the best. As promised when I bought them, they will last me for life!

Other articles you may enjoy….

Reasons You Constantly Miss Your Financial Goals

When Can You Retire?

Small Businesses Need an Emergency Fund

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Procrastination: Killer of Financial Dreams

If you’re saving, you’re succeeding.
― Steve Burkholder

Everyone wants to save money. Few actually get around to it. Of those who do, they wish they had started sooner. Let’s see what happens when you procrastinate:

Age: 35
Amount saved: $500 per month to age 65
Average interest rate or rate of return: 7.5%
Accumulated value at age 65: $677,933.48

Age: 40
Amount saved: $500 per month to age 65
Average interest rate or rate of return: 7.5%
Accumulated value at age 65: $441,371.88

Age: 45
Amount saved: $500 per month to age 65
Average interest rate or rate of return: 7.5%
Accumulated value at age 65: $278,595.77

Age: 50
Amount saved: $500 per month to age 65
Average interest rate or rate of return: 7.5%
Accumulated value at age 65: $166,590.86

Age: 55
Amount saved: $500 per month to age 65
Average interest rate or rate of return: 7.5%
Accumulated value at age 65: $89,521.20

Procrastination kills financial dreams. Make your financial dreams come true by starting to save early in life and by being consistent throughout the years.

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Making it Personal

It took a personal financial disaster for me to realize that I had to get my finances in order. Forty-two years ago I had a family friend who took on the chore of giving me the swift kick in the ass I needed. There were five truths pounded into me in that session that provided me with the motivation I needed to get on the right financial path.

The financial position I was in at the time was exactly where I had planned to be. The reality was that by not having a plan (budget and a financial goal), I had taken on life’s default plan of financial failure. Only by changing the way I handled (spent) money could I get on the right path.

My spending was the source of my financial troubles .. not that I didn’t earn more money. It was pointed out to me that there were others who had a lower income than I did who were not living paycheck to paycheck and buried in debt. In fact, many of these people had managed to accumulate a decent amount of savings.

I was going to earn a fortune in my lifetime and I would have nothing to show for it if I didn’t change my actions. Clearly, I couldn’t be saving and investing for my future when I was spending more than I earned. Living within my means and saving money would require conscience, determined actions.

My mentor brought me to the realization that if I saved the next 5 years like I had for the previous 5 years, then I would be in the same place and I would have financially wasted 5 years of my life. Then he asked me how many 5-year periods I was planning on wasting.

I had to pay myself first out of every paycheck. I had to put money in my savings before I paid my other bills. If I paid myself after I paid all bills and living expenses, I would never have any money to put in my savings. My past experience provided all the proof needed of this truth.

Every person’s situation is different. What motivated me, will probably not motivate you. That’s fine. But … please find what will motivate you to become a financial success story!

You deserve the benefits of being financially secure!

“When money realizes that it is in good hands, it wants to stay and multiply in those hands.”
― Idowu Koyenikan

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Reasons You Constantly Miss Your Financial Goals

Image by Jerzy Górecki from Pixabay

Let’s assume you are trying to reduce your spending and save money. However, month after month you continue to spend more than you save. In fact, your financial position this month is worse than it was last month.

Why are you unable to manage your spending and start saving so you aren’t always behind every month?

Most of the time, there are three reasons for constantly missing your goal. Typically, you are:

  1. Lacking the right type of motivation
  2. Not consistent
  3. Setting yourself up for failure


You don’t have a specific goal. Lets look at an example comparing a fuzzy goal against a specific goal:

Fuzzy Goal
You want to spend less and start saving some money.

Specific Goal
You want to spend $250 less each month and put that $250 into a savings account to establish your Emergency Fund.

As you can see, this specific goal is clear and can be easily tracked. It is measurable so you always know if your actions will allow you to meet your goal.


The underlying problem is that you haven’t replaced your habit of spending with the habit of saving. That’s all it is … replacing an undesirable habit for a beneficial habit that will reduce the stress in your life.

Setting Yourself Up for Failure

Let’s say that can’t seem to bridle the money you spend on new clothes. You break that habit by not going to the mall or your favorite boutique every week. You might want to limit your clothes shopping to once a month. You may also want to consider shopping at consignment shops or upscale thrift stores. You’ll save money and the money you save can be deposited to your Emergency Fund bank account. Hence, you will be spending less and saving money for a future need.

The simple truth is that only you can determine the ways you can spend less and save more and those must be based on your lifestyle and goals.

In addition to what is stated above, you also need to track your expenses and develop a monthly budget. If you aren’t currently using a budget, the following articles will give you some ideas on what and how to do it:

WordPress bloggers offer a ton of valuable information on budgeting and managing your money by following the tags below:

  • Budget
  • Saving Money
  • Personal Finance
  • Frugal
  • Thrift

“Many people lack discipline when it comes to saving money. What good is having a bunch of stuff if you’re struggling, in debt, or broke most of the time? So many people put up a front like they’ve got it going on, but they know the truth. They spend all of their money trying to look important, and/or keep up an image. Knowledge is everything! Educate yourself about money, investing, and saving. I encourage you to start investing in yourself instead of things! Set yourself up for a better future and start making better choices. Building wealth takes time! Have discipline. Save. Stay consistent. Be brave enough to change your spending habits. Be wise! Don’t allow money to control you. Strive to have a healthy relationship with money!”
Stephanie Lahart

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When Can You Retire?

Image by silviarita from Pixabay

“How do I know when I can retire?”

That was the #1 question my clients older than 50 asked me when they were getting serious about retiring. What they were really asking though was “Do I have enough money saved and invested?”

There are numerous financial advisors (professionals and celebrities) who have sophisticated methods of determining how much you need based on your current income and your future plans. However, I had a mentor that encouraged me to set all that aside and give my clients one very simple answer that they can relate to and is simple enough to act as daily motivation. It is as simple as this….

When the monthly income from your savings, investments and pension(s) exceed your monthly income from working, you can financially retire.

However, this assumes you have no debts … including a mortgage. It also assumes that you will save or reinvest at least 5% or your retirement income to offset inflation and other increased expenses related to ageing.

This is the principle I used in planning my retirement. I was able to retire at age 55 and I am saving far more than 5% of my monthly income. (See most recent monthly budget.) As a note, I’m not eligible (due to age) to start receiving Social Security Retirement Benefits until 2024.

With all this being said, having enough money to retire doesn’t mean you should retire. You may want to keep working, you may have a particular special something you are saving for or you just aren’t mentally ready to retire yet. The point, however, is that you know you are in a financial position to retire if you want or need to.

Rest is not idleness, and to lie sometimes on the grass under trees on a summer’s day, listening to the murmur of the water, or watching the clouds float across the sky, is by no means a waste of time.
J. Lubbock

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Small Business After COVID-19

People and businesses are anxiously awaiting for the “stay at home” and “social distancing” lockdown restrictions to come to an end. People are wanting to get back to work so they can pay their bills. Businesses are wanting to open so they can pay their bills and serve the needs of their customers.

When businesses are open again, will they be able to pick up right where they left off when they were forced to close?

This question has every small business owner and their employees staying awake at night worrying about future of the business and their personal finances. As a former small business owner for 32 years, I have these questions for current small business owners:

  • How did the pandemic lockdown effect your customer base? This is especially critical if the business targets a particular demographic.
  • If your customer base was particularly vulnerable during the pandemic lockdown, do you need to adjust your marketing strategies, products or services?
  • Do your payment options serve the needs of your customer base under the new realities?
  • What is the debt load of your business? Can your business meet your debt obligations until your business gets back on its feet?
  • What about your employees? Will you need the same number of employees or will you need to reduce your number of employees until your business gets back on its feet? How many of your old employees will not be returning?
  • Can your business stay afloat due to the lag time between the time the product or service is provided until the time you are actually paid? This is especially critical when your service is provided over time. (Example: a contractor)
  • How did the pandemic lockdown affect your competitors? Will you have fewer competitors? If yes, how can you attract the customers of those businesses that didn’t survive? Do you have a marketing and contact plan for those potential customers?
  • Are you, the owner, in the right physical and mental condition to rebuild your business? Don’t fool yourself — you will be facing a new, different marketplace. People and businesses went without income for a month or longer. Money will be tight. Every sale will take more effort than it did before the pandemic lockdown. If you need help, get it sooner than later.

For some small businesses, receipts for the first 90 days may only be 50% of what it was the 90-day period before the pandemic lockdown. It will take a while for business and personal incomes to start flowing through the marketplace.

My sincerest hope is that you are or will be one of the survivors! If you have been in business for a few years, you already have the knowledge and skills to get you through this time of uncertainty. All you need to do is put it to use.

“I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”
Steve Jobs

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