The key to happiness Part 3
I have been fortunate enough to be a fairly happy
individual. To steal a quote from Wyatt Earp in the movie Tombstone , “I don't
laugh all day long like an idiot”, but I’m fairly happy.
I have always enjoyed educating
myself through reading, doing, and talking to those who have done it. I have
had many opportunities to speak with people in their 70’s, 80’s and even 90’s.
My favorite question to ask someone of that age is “Looking back over your
life, what would you say is the key to happiness?”. Time and time again I have
heard the same thing from many people. Putting together what they have taught
me and what I have experienced I have found that there are two keys with two
pieces per key:
Health:
Physical
Health
Mental
Health
Wealth:
Physical
Wealth
Mental
Wealth
These are very important keys and
each one has a lot of information to them. I will break it up into weekly
segments. This week, Physical Wealth…
Yes, I know, money does not buy
you happiness. This statement is true but cash is an important factor in a
person’s life. Money alone will not make someone happy. If you are hoping solely
on your personal wealth to give you a long happy life you will not find it.
Money is but one key and, really, not the most important key. After a person
has addressed physical health and mental health, physical wealth is the logical,
and important, next step.
You can live a long life without
money but if you do not prepare financially for those long years ahead they can
be miserable. A person does not need to be rich to retire happy. It all depends
on the individual. If you are someone that likes to shop and travel and eat at restaurants
all the time then you better save a lot of money for retirement. If you have no
problem living a more restrained life you will still need SOME money in
retirement.
As we talked about previously, you
will need to be physically active. You will also need to be mentally active. So
really, a person will need to keep busy in retirement with hobbies that feed
the need for both physical and mental activity. These hobbies will most likely
not be free. Even if you own your own home and like to garden your own land.
There will be costs for plants, water, equipment such as shovels, rakes, etc.
The point is, not much in life is free and the way it is going people will find
a way to charge money for everything.
I have known people that saved no
money for their retirement. These people were not very happy. Some were even
pretty miserable. Without having money available it is difficult to travel to
see your children, grandchildren or other relatives that do not live close. It
is easy to become a prisoner in your own home. I find it very sad and
frightening for a person to be trapped like this after living a long and
fruitful life.
I have also known people that
saved well for their retirement. Going back to my friend that is in his 80’s, he
has prepared well for his retirement. He is able to do what makes him happy
now. He spends quality time with his children and grandchildren. He has hobbies
such as gardening, canning and many other things that keep him busy. His wife
and him have lived in Kansas and traveled to Arizona for the winter
for many years. They started out driving an RV to Arizona every year. Eventually he downsized
to a camper to make it easier. After his wife passed away he sold the camper
and just bought a house in Arizona .
Now he can easily travel by car to his winter home at the first sign of cold
weather. That makes him happy.
Now saving money is not easy for
everyone. It took me a long time to learn the importance of saving. When I was
young I spent it as fast as I could make it. Fortunately I eventually figured
it out. I am saving like mad now and believe I am on the right course. I have
learned a lot from Dave Ramsey. I recommend everyone do some research on him.
He is a smart, no nonsense, financial guru and author. He has many books that
can help a person understand the why and how of saving money.
Most people that work have access
to a 401K. This is a savings plan that employers offer to their employees.
Usually your employer will match a certain amount of what you put in each
paycheck. This is like getting free money. If my employer matches 100% up to 3%
and 50% up to 5% of my 401K contributions here is how it works: For nice round
numbers lets say 5% of my pay is $100.00. I put in 5% of my pay ($100.00) into
a special tax deferred savings account and my employer puts in 4% or $80.00.
Once you become fully vested, after a course of full time employment for a few
years, this $80.00 becomes part of your nest egg. So if you put in $100.00
every two weeks and your employer matches you $80.00 every two weeks in 10
years you have put in $26,000.00 and your employer has put in $20,800.00. Your
nest egg has grown big time! Not only do you get a free $20,800.00 but it doesn’t
end there. A 401K is invested in a stock, bond or mutual fund of your choosing.
The average rate of growth in recent years for these investments is 10%. Then you
get into compounding interest and other things and after ten years your
$26,000.00 investment has more than tripled to $75,734.63!
Another tax free way to save money
for retirement is an IRA or Roth IRA. This is an account that you put money in
and are able to access after retirement. It does not get matching funds from
anyone but it still grows (or drops) at an annual rate. This is a very good
option for a self employed person or someone wanting to save additional funds
besides a 401K.
The point is there are means of
growing your nest egg. It is important to save money but it is also important
to grow your money. If I hide $100 every two weeks for ten years in my mattress
I will end up with $26,000.00. If I put $100.00 every two weeks for ten years
into an investment that earns a 10% growth I have $42,074.79. With the rate of
inflation at 4% I did pretty well. Today’s dollar will not be worth the same in
ten years as it is now. Milk cost about $2.50 a gallon in 2004 but today in
2014 it costs about $3.16.If you don’t grow your money at a rate higher than
inflation you are losing money every year it sits in your mattress.
The younger you start the better
off you will be. We have established that if I invest $100.00 every two weeks
for ten years at 10% growth I will have $75,734.63. Not bad but if I start this
when I am 25 and continue until I am 65 I would have $1,168,444.19! Yes that is
over one million dollars! In reality I only invested $96,000.00 but compounding
interest made me a millionaire!
These numbers may seem really big
to some people but the point is to put money away in an investment every
paycheck and prepare for those awesome years that you get to spend not working
every day.
If you are looking for more
information on investments and how ANYONE can save money for retirement I think
this is a great place to start: http://www.daveramsey.com/home/
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