The economy is in turmoil. You may have noticed.
Your house is worth less, your job is less secure, credit is harder to come by, and filling the gas tank consumes virtually a whole day's pay. Many people all over the world are experiencing their worst financial pinch in decades.
Thinking about the future seems almost pointless.
There is a solution, though. Don't listen to your budget howl about how tight money is and how you need every dime for today.
Now, more than ever, it's vital to build a cushion for tomorrow.
It's not a pipe dream. It's essential.
As difficult as it might be now to make ends meet, it would be far worse when you're old and gray and don't have bus fare, let alone money to fix the car.
The good news : RM25 a week or RM100 a month will do it.
Unbelievably depressing data
First, let's contemplate a scary data a research company that tracks 20 million participants (i.e., real people) in USA
Nearly half of all workers 25 and older have less than $50,000 saved for retirement (excluding their homes and any pensions). It's just the same and equally as bad in Malaysia as I'm sure many of you have read that many people finish off their EPF within 3-5 years (if it lasts even that long) What happens after that???
22% of workers and 28% of retirees say they have nothing saved.
The top financial obstacles people listed were, in order: the rising cost of living, health insurance or medical expenses, mortgage payments, debt, and fuel and energy costs.
Cost of living versus cost of not saving
Those would be the reasons my husband and I have a hard time saving, too.
Our electricity bills cost RM200 . It now costs more than RM80 to fill up the car, and, honestly, I can't even add up the petrol or grocery receipts each month because it's so depressing.
I did it once. Not including petrol, we spent about RM800 on food and miscellaneous household expenses, about RM150 to RM200 more than we did last few years.
We even cut back our retirement savings for two months in order to play catch-up with our taxes.
But we kept saving, and we're still saving. Because no one in this economy can afford not to save.
"When you spend a ringgit today, you're giving up about RM16 in 36 years from now," says David Wray, the president of a nonprofit association of companies that provide defined-benefit plans to about 5 million workers.
Add before you subtractWray uses something called the Rule of 72, which is a standard personal-finance tool to demonstrate the power of compounding.
The Rule of 72 estimates the rate at which your money saved will double. Just take a hypothetical rate of return -- Wray uses 8% -- and divide that into 72. By this estimate, your money would double every nine years.
That means a ringgit invested at 8% today would be worth RM2 in nine years, RM4 after 18 years, RM8 after 27 years and RM16 after 36 years.
Of course, there are countless factors that affect the real-life growth rate of your savings: how your money is invested, the time frame, the rate of inflation, taxes and so forth.
The point is that whatever amount you save won't remain the same; it grows exponentially over time. Thus it's less important how much you save than that you harness that financial momentum by saving absolutely anything at all. Even RM100 at a time.
The RM100 retirement revival planHow much might the average strapped person be able to save? I pick RM100. It's a round number, and a small one, but it can add up quickly, as you'll see.
According to our pocket calculator(to obtain one, you can call me at 012 3386033), if you saved just RM100 a month, you'd end up with almost RM100,627 in 30 years, assuming an 8% return. (Historically, that's been the long-term minimum return for investing in our unit trust investment.)
That amount could keep you afloat in your golden years. It's a lot more than nothing.
An additional cushion of even relatively small amounts like those can cover some medical costs, car and home repairs or other expenses that might otherwise send you into debt or leave you flat broke.
Ideas on how to save RM100Here are the rules: The key is to pick at least one way you can immediately save RM100 this month. If you pick more than one, that's great. But for each RM100 you save, you have to:
* Put RM100 in an envelope and deposit that money in your mutual fund account by the end of the month(don’t cheat!!)
* Write a check for RM100, put that in an envelope, and deposit it.
* Or set up an automatic transfer/standing instructions right now for RM100 to be zapped into your savings account each month .
Yes, you can save RM100How easy are these?
* Cut RM100 out of your monthly grocery budget
* Slice RM100 out of your vices for the month (cigarettes, alcohol, magazines, music downloads, ice cream, pay-per-view TV).
* Bring lunch to work twice a week. (Leftovers are free.)
* Avoid buying breakfast, coffee(especially at Starbucks or Coffee Bean), soda and snacks. (Or just be good for a few days.)
* Ditch monthly charges and subscriptions you never use.
And if, heaven forbid, you find yourself resisting the idea of taking just one of these simple, mindless steps that will cost you barely any effort whatsoever, just remind your shortsighted self: This is worth RM150,000!
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