The No. 1 financial fear for most people — especially baby boomers — is running out of money and not being able to pay for any major expenses that might happen down the road. They worry about having enough money for their children’s college education, struggling to pay off hefty home mortgages, and prematurely zeroing out their retirement savings.
These fears are heightened by stagnating incomes and increasing inflation, especially for healthcare costs. This opens up the question: Will you be able to afford your major expenses for the rest of your life? The wealth builders at Paradigm Life believe it is possible to live a comfortable life even if you never earn significantly more than you do today.
Here are the five steps you should take to ensure you can fund all of life’s major expenditures on your current income:
- Recognize the underlying reason you’re fearful: If you are concerned about outliving the money you’ve saved for retirement and not being able to afford your expenses for the rest of your life, an underlying reason you’re fearful is because the most common retirement savings vehicle – the 401(k) – is setting you up for financial volatility. Wall Street benefits from the enormous infusion of investment cash from ordinary Americans, but many of these individuals ultimately are crushed under the uncertainty of market forces.
- Stop concerning yourself with market yields: Because the 401(k) and the stock market in general are at the heart of your financial fears, the key is to disassociate yourself permanently from this rat race. Instead of turning to financial advisers and investment bankers to manage your investment portfolios, you should be turning to wealth strategists. Wealth strategists don’t live and die by market yields – their sole job is to invest in the financial products that make the most sense for you, not for Wall Street.
- Stop trying to hit a magic number for your savings goal: Your savings goals shouldn’t be defined by a single numerical goal (for example, $1 million for retirement) because it’s an arbitrary number that doesn’t necessarily mean a comfortable retirement. First of all, you have little control over inflation, especially healthcare costs. You also don’t know exactly how long you’ll live. Instead, the key is to develop a comprehensive wealth management strategy that provides security and liquidity and acts as a hedge against inflation.
- Build a secure foundation: To develop a solid wealth management strategy you need to have guaranteed growth that is insulated from the volatility of financial markets, is a secure investment and can become a liquid asset for any expense – whenever you need it. A properly structured Whole Life Insurance Policy fills all of these requirements.
- Start to double dip: With a whole life insurance policy, the full cash value can be accessed by borrowing against the policy, at a low-interest rate, and using that cash value for virtually anything – buying a house, college tuition, retirement income, and so forth. Although you’re using your cash value to fund other investments, your policy retains that cash value and you’re not hit with a tax liability; in fact, you still earn dividend payments and interest on the borrowed value. The ability to access this cash value is how you can effectively leverage your existing financial resources.
No one wants to be in a situation where they become a financial burden to their children and loved ones because they cannot afford major expenses in life. The key to creating real wealth, even assuming you never earn more than you do now, is to understand the underlying reasons you’re fearful about running out of cash and to realize that there are better alternatives to the volatility of the traditional investment vehicles that rely on the Stock Market.
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Q: What are effective strategies for financing significant expenses without relying on debt?
A: Effective strategies include creating a dedicated savings plan, setting clear financial goals, prioritizing expenses, and exploring income-generating investments.
Q: What is the main objective of these strategies?
A: The main objective is to enable individuals to cover substantial expenses using their current income, without resorting to borrowing or depleting their savings.
Q: What are the potential benefits of implementing these strategies?
A: By implementing these strategies, individuals can enhance financial discipline, reduce debt reliance, preserve savings, and work towards achieving their financial goals while maintaining stability.