A Talk About Savings For Single People By Richard Wesselt, The Life Insurance General
Having spent 31 years in safe secure planning, we come across a lot of young single people who start out in life not exactly knowing what to do with their money. They’ve been bombarded with various hypes from the media, their parents and from third party sources.
When beginning a plan, we want to start with building a savings habit in the bank. Today, banks don’t get as much attention as a vehicle to accumulate, but it starts to build a rock-solid foundation along with good habits. The goal is to save 15% of your gross income and live off 85%. Unfortunately, a very small segment, approximately 2% of the population who goes to work each day religiously saves 15% of their income, so working with young clients on that habit is of paramount importance.
The reason for the 15% is 5 different 3% factors that erode money. First is inflation, second is taxes, third is miscellaneous events that happen, fourth is planned obsolescence, and fifth is technological change.
Let me briefly elaborate on each of the 5.
Inflation; things go up in price each year. Taxes; once you receive a paycheck, you can start to see how your gross vs your net income is a great difference. Miscellaneous; would be something like water in the basement unexpected or a leak in your roof. Planned obsolescence would be something like a car repair, or changing a microwave, changing a washer or dryer, or updating your style.
Lastly, is technological change. I started in 1990, back then there were no cell phones yet, the internet wasn’t around and the cable bill was $11 a month. Today the average person spends between $300-$500 a month, just on technology. So, if we didn’t address technological change early on with a client, the safe secure plan would be flawed out of the gate.
Practically speaking we don’t need to save 15% all at once, but that’s a goal. It could be 3% or 5% but developing a good savings habit early in life is very important.
Coming at this from a football mindset with my Life Insurance General ideas, the life insurance piece and the bank account piece formulate the left tackle and right tackle, two great protectors of the quarterback that over time become very important.
So, two vehicles that we want to build through are a regular everyday bank account, with consistent deposits; separate from paying the electric bill and the cell phone bill. The second piece is to utilize cash value life insurance, as a fundamental bedrock for a solid safe secure model that would allow you to both build cash value and protect your family. If set up properly you will avoid any future taxation which helps us to make sure all of your money can work for you as safe and tax efficiently as possible.
Lastly, developing a good habit is hard for young people when one is face with student loans, first rent payments, a car payment and other bills that everyone else has. As time has gone on, I have found it harder and harder for young people to save. So, we’ll work very efficiently in the office to help develop good savings habits.
If you have more questions on Savings For Single People, don’t be afraid to reach out the The Life insurance General, Richard Wesselt.