The Financial Epiphany
Guest Post by Dennis Miller at Miller On The Money
I recently interviewed my nephew James about building wealth. His experiences were similar to mine, explaining wealth accumulation can be accomplished by paying off your debts; not only high-interest debt, but also paying off your mortgage as soon as you can.
I was in my late 40s the first time I filled out a Retirement Plan Income Calculator. After carefully following the instructions, the conclusion was painfully obvious: I was in trouble and would never be able to retire unless I changed my spending and saving habits radically. I called it my “financial epiphany.”
Webster defines epiphany as:
- an intuitive grasp of reality through something (such as an event) usually simple and striking
- an illuminating discovery, realization, or disclosure
- a revealing scene or moment
The real challenge was building a workable plan to get out of debt, and to accumulate and compound wealth. It’s pretty hard to save when the majority of your income is spent on monthly payments for borrowed money. That had to stop.
As he emphasized, building a financial plan, and having it work means both marriage partners have to buy in and work together – or it flat won’t work.
James and his wife managed to pay off their home mortgage in their late 30s and will have the mortgage paid off on their summer cabin in a few short years. He encouraged me to help his generation understand the details of home mortgage interest, and how much interest you actually pay.
UNDERSTANDING A HOME MORTGAGE
I like the Calculator.net loan calculation tool which allows you to work with all the variables.
Let’s take a hypothetical couple, Sam and Suzy Jones, both age 28, with a combined gross income of $100,000….
They already stole my pensions.
Just put your money in a savings account at 14% interest for 40 years like Dennis advised last time.
Easy peasy.
After the pension crash Wall Street MegaBank DEI AVice President Epiphany Spears was quoted as saying “Oops. I did it again.”
Sorry you lost your pensions bud.
#Metoo
Obamacare changes everything as far as financial planners should be concerned. You have to the age of 50 and certainly no latter then 55 to get situated.
1). First establish where you want to spend the rest of your life. Be willing to buy small at high per square foot. Nice places are expensive.
2). If you live in NJ, Ct, Ny , Ma. You should rent and buy small expensive vacation property.
3) Get rid of your car if possible.
4) Once your 50 or 55 . If your not grossing at least 120 to 150 thousand a year, your marginal tax rate if you (factor a health care policy that will cost over 20 thousand a year) will be well over a 50%.
5) Work part time jobs once you get to 50 to supplement income and qualify for health subsidies.
6) once you hit Medicare go back to work full time if you need more money.
Dumb list.
Every individual’s retirement needs are just that–individual. There is no magic formula for everyone.
Don’t know where you got that $20k figure for health insurance…my SSI is $3k/month AFTER my $240/month deduction for Medicare Advantage with Ahthem/Blue Cross-Blue Shield. It includes a free YMCA membership ($900 annual value), plus $120 quarterly credit for sundries at Wal-Mart.
So my true cost is $1500 a year. Plus the deductions are low and my dental is better than the corporate plan I could get where I work (yeah, I’m still employed).
Once you get to Medicare is my point. But health insurance will be over $ 20,000 a year just before you reach that. My point that future liabilities are going to soar after the age of 50 for middle income people to the point where they won’t be able to save much money.
The system will probably implode in the not distant future because of the health care snag.
But that is no excuse for a financial planner to be ignorant of the new reality.
My company’s health insurance is free for their basic plan.
But I dropped it since I had already signed up for Medicare Advantage. It got too confusing every time I went to the doctors–they never billed to the right one and I’ll be retiring from my employer in a year anyway.
Nothing is free. Your company knows how much you cost them. Hint, younger workers cost them much less.
My formula is magic!!!!!!!!!
If you are fairly young making $100k/yr living in the northeast or west coast, do you research, pick a low cost state where you can get the same job probably making less and MOVE.
Get the hell out of the city you are living in where you don’t need a car.
In the state of your choice, buy a house size you can pay off in 15 years. Use cash not credit cards or at least pay the card off every month. There are purchases where a credit card has benefits over cash. Buy a used car, other than the house, have no other debts
We are never going back to 2019…………
Americans WILL be EATING bugs in 2024.
NONE of this Save for retirement matters…………….because
nuclear war will NOT BE AVOIDED.
(AND the US will no longer be much populated).
IF you are young, get out of this Country yesterday!
That’s like finding a better spouse. The grass is greener on the other side of the fence.
Where are you going to go?
Yes yes yes
Don’t
Buy a better house
A better car
Go on vacation
Go out to eat
Until your debt is paid off!!!!!
Your life will be much more relaxed.
Yep.
One fast way to wealth is to consistently live beneath your means.