Let’s examine how people spend their money. In general, the average household will earn $52,000 a year. After a lifetime this total equals $2 million. Of course, if you are a CPA, you will earn double that amount. A trial attorney might earn over $8 million and a doctor could earn $12 million. Regardless of the amount of earned income, the U.S. Census says the average person reaching age 65 will have less than $60,000 in total assets, including equity their home. How is it possible to make $2 million in a lifetime and barely have $60,000 left to show for it? (My post on NFL player Luther Ellis is a good example: An Emotional Story of Rags to Riches and Back to Rags). No wonder 92 percent of all retired people are totally dependent upon their monthly Social Security check.
Here’s how we end up with only $60,000 at age 65:
- We work to earn an income.
- We pay taxes on the earned income.
- We spend the rest.
Everybody and everything is selling you something. The selling process is relentless! Every television and radio station, Web site, newspaper and magazine include colorful ads and entertaining media enticing you to spend. Since very few people have a spending plan the money comes in the door and goes out the door the next day. It’s just gone.
When we do manage to save a little money, life events have a way of hammering on our delicate nest egg, cracking it to pieces and leaking out all the money inside. Here is a list of just some of the ways life can puts cracks in your nest egg:
- Bad investments
- Job layoff
- Sickness and medical expenses
- Technological changes
- Impulse spending (25% of all purchases are unplanned)
- Old age
- Interest expense
It’s little wonder that we find it hard to keep our “nest egg” intact. That means that at retirement, many people have to work part-time to make ends meet.
Do you want to avoid being included in the average American’s abysmal financial situation? The only way to do this is to create a spending plan, debt plan, savings plan, and retirement plan. To stop repeating this terrible cycle of financial failure, sign up for the FREE Basic online program and complete the simple “7 Steps to Money Mastery” course in our Education portal.