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Mutual Funds A Well Developed Plan
This argument should not be linked to mortgage payments or financing of what is known as durable goods. The term durable goods applies to cars and appliance, things that are needed to function a normal existence. One the other hand, blazing computers, wide screen televisions, and other non-essential goods are not considered durable.
The important thing to understand is that controlling these kinds of frivolous debts without refinancing or drawing additional equity in your home for debt consolidation requires patience and time. Rolling or consolidationg debt is actually adding years, often outlasting the goods that were purchased. In other words, tying products and vacations to your home do not constitute wise money management. Manipulation maybe, but not management.
That said, let's start with timing. A late start is not a bad thing. Certainly not as bad as never starting at all. There will be 40 million baby boomers celebrating their 50th birthday over the next decade. This seemingly large number is estimated to be the real reason there has been such an urgent call for Social Security reform. More alarming is the fact that many of these "boomers" have not made much in the way of retirement savings outside the equity in their homes. Estimates of retirement savings have been made based on the current group of fifty year olds.
Those results are troubling. Pollsters have found that the average retirement savings amassed by this group by the time they reach their fifth decade is less than fifty thousand dollars.
It is relatively easy to see why. The current savings rate in this country, based on recent Commerce Department figures, is around 0.2%. That is a steady decline from a 1984 high of 10%. That's right. A mere twenty years ago, the average American was putting away $10 for every hundred dollars earned. What changed?
Some believe the measurement does not portray how America currently saves. The method by which we measure the savings rate is believed by some economist to be antiquated. Currently, the statisticians use a measure of personal income, money brought into the household, and compare them against expenditures, money spent by the same household.
The main complaint about the numbers offered by the Commerce Department comes from the measure current income while ignoring previously invested dollars. The figure they calculate subtracts expenditures from income, an after tax calculation that includes wages, dividends, interest, rents and even an employer's pension contributions arriving at a rate that may be unrealistic.
Economist believe that this kind of calculation is subject to some basic under-over estimation errors. By underestimating income and over estimating expenditures, it is easy to find flaws with the department's numbers. The suggestion that the agency also include capital gains and the profits from home sales as part of the calculation for income, economist believe that the number will better reflect disposable income. The flip side of that argument rest on the consistency of such income. The low and favorable mortgage rate that has spurred refinancings and selling offers a glimpse of an accommodative moment in time, not earned income.
On the expenditure side, large purchases usually made over time are booked as one time expenditures rather than time based purchases. Economist suggest that a better method of estimating expenditures of big ticket items like automobiles would be to book them the way the consumer does, as monthly costs rather than a lump sum.
The estimations of actual savings in this country are further skewed by the proportion of the population that actually invests. It is estimated that 10% of the population controls two-thirds of the cash as well as 50% of the invested money in the stock market. That leaves a decidedly small piece of the pie for the remainder of the investing public. When politicians point towards half the nation as an "investor class", they are basically further skewing the numbers by suggesting that the remaining 90% of the population is responsible for only 40% of the invested dollars.
To begin a well developed plan, it is important to understand that savings are any portion of your income, your taxable wage that includes any money that is regularly received, that is put away in the form of investments for a rainy day or even for retirement.
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