Over the past 20+ years I have counseled hundreds and hundreds of individuals, families and businesses on the full gambit of financial decisions from budgets and planning, divorce, bankruptcy, litigation and all forms of negotiated financial settlement.
One constant throughout is that no one likes to make do with less than they are accustomed to. So long as people are able to fund themselves through access to capital or more credit, most will not change behavior even when it is clearly leading them to financial suicide. Once cash flow cannot be expanded or continued however, once payments from others and credit lines are cut, most people figure out the changes needed to survive.
The culture of entitlement engendered over the past many years, enabled via “financial securitization” (a euphemism for leverage suicide) has brought the western world to a tipping point. This clip explains the plain math of the US fiscal deficit, but it really highlights the challenges facing most of the world today.
Zeros will have to be wiped off of debts globally and credit lines will need to be closed (or the debts will just grow back), inflated asset values will need to be written down, spending habits will need to be changed and individuals will learn to be more accountable and self-reliant–spend less and benefit more. In the new post-debt bubble world, we cannot afford the wasteful habits we have developed over the past 30 years. Efficiency and financial honesty about what we can actually pay for, must be the new model.
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And, who is going to pay, exactly? The ones who have very little or the ones who created this mess and walked away with pockets full of money! When they bring these people to justice (or ask for some of their millions they STOLE), I will tighten my belt, f not, I will see them as complicit to the culture of nepotism, of protecting their wealthy friends who can corrupt them.
Good report. I suspect the budget problem could be solved if some effort were put into solving it – so far there has been no sincere effort. I’d start with a 20% cut across the board for all government spending except do a 30% cut in military spending, and that 20% would include all existing government pensions (except current and future congressional pensions which I would eliminate completely). All future government pension funds would be put into Social Security and those people would get a larger than normal SS check based on what their government pension would have been under the old plan, but not nearly as large as the old government plan amount. SS checks would not take a cut – people paid into that system and it’s barely enough to survive on for most people. Then I’d raise taxes 20% on all individual and corporate incomes over 200K – so if you paid $50K in taxes last year, this year you’d pay $60K -no biggie for a $200K income. And I’d raise taxes 5% on incomes between $50K and $200K. Everyone needs to feel the pain – it’s a big wound.
That would be a start.
The Hinsdale Fine Art Show was a huge disappointment Sat-Sun. We live in a very upscale, affluent community 22 mi W of Chicago, bedroom/family community right on the RR tracks into the city. Most of the exhibitors said they did not do well in sales at all. The fish just weren’t biting. Can you blame them? Stocks down, college bills up, real estate taxes way up, its ILLINOIS. What a mess. Thats 250 bucks plus planning and travel down the drain all for naught. Expect more of the same I’m afraid. Common topic was lack of employment ops for recent college grads after racking up considerable debt. Sad, very very sad.
What many people fail to realize is that the amount they have at retirement is mostly about how much you saved before retirement. Investing returns matter but not as much as saving more. I have always regarded investment return as a “bonus” on top of what I have put away for later.
If you want to minimize the chance of a bad outcome like being poor in retirement save more and don’t put your savings at unnecessary risk – which is where people like Danielle come in. Most advisors want you to take more risk because its not their risk and because they get paid more over time. How to save more? Make it automatic as a withdrawal every month. Start with 5% of pay and ratchet it up over time to 15% ,20% or whatever is necessary.