Free Up Your Income
How Far Can Your Money Stretch?
Eat – Or Save For Retirement?
Consider the advice many financial advisors offer their clients regarding retirement
“Save 15% of your salary starting at age 25. Invest these funds consistently in your choice of
three retirement vehicles:
• a 401(k)
• a taxable IRA or
• a Roth (non-taxable) IRA
Within those vehicles, invest equal amounts of that 15% into a mix of three different mutual
• A U.S. total stock market index fund
• An international total stock market index fund
• A U.S. bond fund”
It’s so simple isn’t it? All you have to do is save 15% of your income each month for 40 years
and you can look forward to a happy and secure retirement. So simple. NOT!
With the high cost of living today, it takes the entire income of two family members working
full-time in order to pay the bills, the mortgage, and put food on the table. For most families,
it’s virtually impossible to save 15% of their monthly income. 15% of income is what most
families spend on groceries, so to save 15% of their income, a family would have to slash
their grocery budget and subsist on a Ramen noodle diet. You know this is true.
Nevertheless, that’s the advice of the so-called financial experts.
If You Can’t Save Money – You’re Screwed
The most important factor that will determine your
ability to reach a secure retirement is
having disposable income. That term ‘disposable income’
seems laughable because it calls to mind the image of
someone disposing of money – literally throwing money
away. Picture the image of someone standing on a dock,
throwing money into the water. Of course, the term
‘disposable income’ has nothing to do with tossing money
into the water. It refers to income that is available at your
discretion after you pay your monthly bills (monthly disposable income).
Marielle and Joseph are a working couple living in their own home along with their two kids.
Marielle is a bookkeeper for a midsize advertising agency. Joseph is an assistant manager
for a well-established manufacturing company. They both have good, stable jobs with good
prospects for the future. They don’t live beyond their means but regular monthly expenses
consume nearly all their income. From time to time they have found it necessary to pay for
some expenses using a credit card, as their income occasionally doesn’t stretch until the end
of the month.
In truth, Marielle and Joseph are living on the edge, just getting by on their regular monthly
income. in any given month if expenses are a bit higher than normal or, what’s worse, there
are emergency expenses such as a refrigerator repair, that puts a big hole in the monthly
When Marielle and Joseph encounter unanticipated expenses, they put that on their credit
card. In other words, they go into debt, and along with credit card debt comes interest
expenses which of course are added to the monthly financial load, leaving less for the next