Should Spouses Retire at the Same Time?

Many couples dream of retiring together to realize long-held plans. They imagine themselves traveling to their bucket list destinations. Others are thrilled to spend their extra time with family and not having to worry about waking up early the next morning for work. They coordinate their exit dates then often retire within a couple of years of each other. However, there are reasons why some couples have asymmetric retirements. Some are involuntary due to factors such as business closures, disability or caregiving for a loved one.

However, there are some general relationship challenges introduced to simultaneous retirement.

Couples don’t always see eye to eye. A Fidelity Couples and Money Survey of more than 1,600 couples revealed that 43% disagree about what age they plan to retire, 54% disagree on how much should be saved by the time they reach retirement age, and 49% say they have ‘no idea’ how much should be saved by retirement age.

Some challenges stem from resentment, differing interests and juggling calendars. Picture a working spouse being greeted at the day’s end by the retired spouse asking, “What’s for dinner?” Or a working spouse saying, “Please find something for my retired husband to do! I didn’t marry him to have lunch every day.” Routines can be disrupted when transitioning from full-time work to retirement.

So, is it best to retire at the exact same time or staggered? Here are four reasons for one of you to continue to work after the other has retired:

Build Your Nest Egg

There are only two things you can do with money – save it or spend it. Retiring later provides three benefits. You can contribute more to your 401(k), the earnings can compound longer, and you can defer withdrawals.

Increase Social Security

Benefits might increase from age or additional covered earnings (and may increase benefits to your spouse). If you wait until full retirement age (FRA), you may be entitled to 100% and your spouse 50%. However, if you drew Social Security three years earlier, your benefit might only be 80% and your spouse 37.5%. For every year to defer Social Security from full retirement to age 70, your benefit increases 8%. The maximum benefit at age 70 in 2021 is $3,895 a month.

Too Young for Medicare

Typically, company health benefits end when you retire. Fewer than one in five large firms offer retirees health coverage. It may make sense to stay employed with the company offering healthcare until you’re Medicare eligible.

You Love Your Job

There are non-financial reasons people continue to work. These include sense of purpose, social engagement and value. How many 20-somethings does it take to replace a person with 45 years of knowledge, experience and relationships? And as someone once said to me, “once you get off the horse, it’s hard to get back on.”

I encourage you and your significant other to discuss these three questions to help align expectations and set the stage for improvement:

  1. If time and money weren’t a concern, what would your retirement look like? What are you doing and with whom?
  2. What does your job provide that you will miss (and need to replace) in retirement?
  3. How will your physical and mental health shape your retirement?

Make not working work for both of you. It may require you to apologize more often, be quick to forgive, and embrace opportunities to develop new passions and routines. And it’s never too early to start planning your retirement. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Top 10 Financial Resolutions for 2021

The value of a financial plan isn’t the accuracy of the forecasts, but rather, the conversations and pondering the what-abouts and what-ifs. It’s about clarifying goals, aligning priorities and evaluating the projected implications of today’s actions on your future. In the words of President Eisenhower, “Plans are useless, but planning is essential.” Planning is an on-going process, not something you set and forget.

2020 left scars on humanity and the economy, from the worst pandemic since the Spanish Flu to becoming a country at war with ourselves over lockdowns and elections. Some worry if life will get better, and there are certainly issues and challenges beyond our control. On the other hand, we can control the controllable. Things can get better if you plan ahead or are extremely lucky, and I’d rather put my money on the former. Here is a Letterman-inspired Top 10 List from a financial advisor.

#10 – Lock Them Up

Secure important files and documents in vaults, physically and digitally. This includes usernames and passwords for online accounts and subscriptions. Also, make sure to share a key and combination with your emergency contact.

#9 – Don’t Forget Your Credit

Sign up for credit monitoring. Consider an online service or order and review a copy of your credit report.

#8 – Automate it

On the income side, pay yourself first via payroll deductions for your retirement, savings, and health savings account (HSA) contributions. If you’re enrolled, consider upping your contributions rate to the maximum limits allowed. On the expense side, make life more convenient and avoid late charges by setting up autopay for your bills.

#7 – Update your Budget

There are only two things to do with money – save it or spend it. One of the keys for long-term financial success is controlling what you do in both areas. The average person earns nearly $2.7 million over their lifetime.

#6 – Manage your Debt

A new status symbol is being debt free. Don’t set your debt off to the side. Make sure you include it in your financial plan.

#5 – Review and Adjust Investment Strategies

Review investment account statements with your advisor. Online tools for your 401k plan may include “matchmakers” (your age, risk, etc.), target date or lifecycle funds, auto rebalancers and more.

#4 – Prepare for the Unexpected

Bad things don’t just happen to the “other guy.” Have a cash reserve fund, a contingency plan and maintain the right insurance protection.

#3 – Protect your Estate

Update beneficiary designations for retirement accounts and insurance; and review your will, powers of attorney, trusts, titling of assets, and medical directives.

#2 – Eat your Veggies

Financial health is only one part of your journey. There’s a lot to be said about being healthy in mind, spirit and body. What improvements can you make in your nutrition, sleep and exercise routines?

#1 – Do Something for Someone Else

This act goes by many names including doing the right thing, paying it forward, and charity. Whatever the label, it is rewarding and contagious. What will you do to make this world a better place?

Some call New Year’s Resolutions folly – something that goes in one year and out the other. Some people consider them as ways to shift things in their favor. Either way, I wish health and happiness to you and your loved ones. Secure your future wisely.

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A Fresh Start in 2021

Many say good riddance to 2020, a year marred by a health crisis-turned economic crisis. A ton of effort – fiscal support, dedication by front-line workers, the ingenuity of high-efficacy vaccines coming at warp speed, and true grit – have helped people survive the impacts of the pandemic. The light at the end of the tunnel shines brighter. As for 2021, get a head start by planning considerations you can (and should) review with your family and trusted advisors.

There are reasons why the stock markets post new highs, and why some wonder if the markets have gotten ahead of themselves. Looking ahead, key big picture views include:

  • Long and sturdy global growth. Goldman Sachs’ forecasts of real GDP growth for 2021 are Global 6.1%, U.S. 5%, Developed Markets 5.1%, and Emerging Markets 6.9%.
  • Recovery is uneven. The impacts of vaccines will be non-linear as countries respond differently to the distribution and benefits of the vaccine. And for many countries, full recovery is dependent on the service sectors which will take time to normalize.
  • The U.S. election and divided government (depending on the outcome of Georgia elections) may limit the size of fiscal stimulus, tax and regulatory changes.
  • The list of known risks includes COVID-19, vaccine development and rollout, election impacts, and deglobalization.

Jeffrey Kleintop, Chief Global Investment Strategist of Charles Schwab, reminds us that often the biggest risks are not the ones out of left field (unlike the COVID-19 breakout), but the ones hidden in plain sight. Quoting Mark Twain, “It ain’t what you know that gets you in trouble, it’s what you know for sure that just ain’t so.” Humbleness, doing your homework, seeking advice, diversification, and having a plan can serve you well.

Here are some actionable items that can help you keep your financial house in order:

Continue financial habits from 2020

Americans adjusted due to COVID-19 whether by choice or for survival, including setting a budget, spending less, saving more, stretching cash reserves and upping financial knowledge, to name a few. These are good things that can be contagious among your family members and friends.

Adjust your Thrift Savings Plan (TSP)

TSP provides a chunk for most retirees – often 30 to 50% of retirement income. It’s a retirement plan for Federal employees and uniformed service members. And it’s similar to 401(k) plans so these tips are applicable to those of you in the private sector. Many participants have become TSP millionaires because of the following:

  • Long-term consistent savings plan benefiting from of the double-barreled powers of tax-deferred compounding.
  • Forced savings via payroll deduction. Most are auto-enrolled at 5% of pay and money is saved before you have a chance to spend it.
  • Diversify and customize the investment strategies according to your retirement needs. There are five U.S. and international funds, a bond fund and a Treasury Securities fund. For convenience, there are also ten lifestyle funds which are mixes of the five core funds. You might consider broadening your global equity exposure, go smaller in market caps, diversifying bond investments per the macro trends above.
  • Choose between pre-tax and after-tax (Roth) contributions based on your situation, retirement plans and outlooks.

$900 Billion Pandemic Relief Bill

House and Senate leaders recently agreed to another coronavirus relief bill. Provisions may be beneficial to you. Here’s a brief summary:

  • 11-week extension of unemployment benefits ($120 billion)
  • Stimulus checks of $600 per person with similar income thresholds as before ($166 billion)
  • Employee-side payroll tax deferral deadline extended to 12/31/21
  • Renewed funding of $284 billion for first and second forgivable Paycheck Protection Program loans with expanded eligibility for non-profits
  • Additional $20 billion for new EIDL grants and $43.5 billion for SBA debt relief payments
  • Tax breaks including tax credits, charitable deductions, education benefits, and more
  • Other educational, medical, nutrition and transit relief ($233 billion)

We hope your personal and financial health remain top priorities as you set your goals for 2021. May your list of worries be shorter than your New Year’s resolutions, you grow from adversity and you secure your future wisely.

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Sage Advice – Episode 2: Chris Askin, Community Foundation of Western Nevada

Sage Financial Advisors welcomes you to our second episode of Sage Advice, featuring Brian Loy, CFA, CFP of Sage Financial, and Chris Askin, President and CEO of Community Foundation of Western Nevada. This episode is a fun, informative and thought-provoking session about planning for the future, the $30-60 trillion of wealth due to be transferred by Baby Boomers, and interesting stories about giving.

Check back regularly for more episodes of Sage Advice.

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2020: A Year Unlike Any Other

Life has its surprises, both good and bad. During the breaks between smaller-than-normal holiday gatherings, it’s important to pause and reflect on the year that will (finally) come to an end. COVID-19 came without a playbook and left a wide wake of health, economic and personal issues, and we’re still adapting to its everchanging curve balls.

In addition to the toll on health and lives, and the economic and business disruption from the pandemic, we’re grieving the reset of ‘normal.’ However, the pandemic has served as a wake-up call for many to prepare for life’s challenges. Here are 6 key lessons from the year that can be valuable to navigate the future.

Establish Financial Safety Nets

It can be foolish to believe that bad stuff happens to “the other guy,” but not to you. Even “essential” workers suffered income interruption from reduced work including business slowdowns or falling ill. Maintain sufficient cash reserves personally and in the business, keep insurance coverages up to date, and check your business continuation plans to name a few. Follow a written plan that helps you achieve your desired outcomes, navigate through your stages in life and adjust as needed.

Be Smart with Debt

Debt can be a tool, but it can also weigh you down. According to a survey by CreditCards.com, 62% of card holders feel they’re in danger of missing payments if the pandemic continues. And millennials are especially concerned – 25% took on more debt due to the pandemic. Develop a debt-reduction plan, budget to get control of your money, adopt a debt snowball method, and once the debt is gone, redirect the payment into your savings.

Time is One of Your Best Friends

It’s common for investors to panic during selloffs despite the Buffett-like advice to ride out storms and don’t try to time the market. It doesn’t mean you always stand still in market declines, but often patience is a virtue. $10,000 invested for a twenty-year period in an S&P 500 Index through November 30, 2020, grew to about $40,800 (7.3% per year excluding dividends). But if you missed the top ten trading days, you accumulated less than half – about $18,700 (or about 3.2% a year). Bear markets are common. Since 1926, there have been 16 bear markets (20% decline or more). They come about every 6 years, last an average of 22 months with a decline of 39%. This year the S&P 500 fell about 34% and recovered in a short five-and-a-half months.

Some of the Best Things in Life are Free

Check out your 401(k) options at work. They can be great tools for retirement and paying less taxes. Also, they help counter some of our faults as humans – procrastination, fear and greed, and indecision. Use their automatic features including auto enrollment, limited investment choices, and rebalancing. Money comes out of your paycheck before you have a chance to spend it, money is invested, and you’re buying low and selling high.

Lighten you Load

Several charities reported record donations as people decluttered. It may have been due to boredom, spring cleaning, or taking up a new hobby. It also included going digital with important records and photos.

Refocus Your Energy

Stress and anxiety rose from finding hand sanitizer, social distancing from our loved ones, business shutdowns, and more. Relief and success come from focusing on the things that matter and the things you can control like having a plan, saving and investing, cooking at home, exercise and washing your hands.

2020 may be a year to forget, but hopefully there have been silver linings. Remember the words of Epictetus, “It’s not what happens to you, but how you react to it that matters.” I hope you and your loved ones emerge from the wake of COVID-19, possibly bruised but not beaten. And may sage advice help you secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Thanksgiving 2020: Talk Money, Not Politics

Never discuss politics or religion in polite company – or at least, that’s how it used to be before social media. But would you post on Facebook that you just paid off your mortgage? Probably not. Money also is a taboo subject. Americans are more comfortable talking about marital problems, religion, political views and even death than they are about money. We’ve been conditioned that conversations about money are inappropriate or simply none of your business. Some people experience anxiety, embarrassment or even shame when talking about income or wealth.

Nevertheless, the holidays are a time for families and friends to gather (even virtually) and to catch up. And with this stressful year, you may have a unique and valuable opportunity to have financial discussions.

A recent Mind over Money survey by Capital One and The Decision Lab revealed:

  • 77% of participants felt anxious about their financial situation
  • 58% felt that finances control their lives
  • 68% worry they don’t have enough to retire
  • 43% are stressed

Breaking the Money Taboo

It’s important to talk about money regardless of where we are in life. We must reject the taboo and turn money, saving, investing and protecting into conversations so we can be more secure in our futures. In that survey, they found that changing one’s perspective and getting into ‘bigger-picture’ thinking about longer term goals, even for a moment, can lead to healthier behaviors. Goals include retirement, successful children and aging with grace, to name a few. And these people tend to feel greater control, write down their budgets, and save more.

Tips for a smarter money mindset:

  • Keep your goals in front of you
  • Focus on things you can control and don’t sweat the details
  • Cut yourself some slack. Mistakes will happen. Learn from them.

Here are some financial topics to tackle during the holidays with your family in between your favorite working-from-home hack and how hard fractions are (or how much liquor it takes to be a parent).

  • When are we going to retire and what do you want it to look like? Negotiate your shared visions of the future and align priorities.
  • Where do you keep important documents and passwords? What should you have (e.g. wills, trusts, powers of attorney, life insurance, medical directives, etc.), secure them (including digitally), and location of keys, combinations and passwords. If you had to evacuate your home, what would you grab?
  • When is it time to hang up the car keys? Our mental and physical abilities will diminish. Prepare for those transitions. What are the alternative transportation options? What would you wish if you suffered a medical emergency (care, recovery, end-of-life)?
  • Can we afford to buy a (larger) house? What are the trade-offs of staying where you’re at or waiting a few more years?
  • When do we set the adult kid free (cut the financial umbilical cord)? Does financial support impact your retirement plans? And on the other end, how do you pass on your wealth to them?
  • Mom and Dad, tell me about your retirement plan. They don’t want to be a burden on anyone and wish to live with dignity. How secure are they financially? How can we assist in making life easier for them from landscapers to caregivers?
  • What is our family retreat or vacation for 2021? The light at the end of the tunnel gets brighter and this pandemic will end. Celebrate it!

Money can be a challenging topic. You can start the conversation with a brilliant quote by Warren Buffett and end it by asking to borrow some money, if you’d like to. The holidays provide us an opportunity to be reunited with our loved ones and have valuable and memorable dialog. May you always have sage advice and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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To Invest or Not to Invest After the U.S. Elections

We’re in a strange place. Imagine you’re on a road trip in the old days before GPS. Your significant other is driving, approaches a fork in the road and asks you “which way do I go?” Your key job as navigator is to read the roadmap and stay on course, but it’s foggy and you’re unsure of where you’re at.

That foggy place is not unlike where we’re at today. It’s a week after Election Day, thirteen states are still counting ballots or have run-off elections, and there are election disputes. Also, the entire world is anxious for approval and distribution of COVID-19 vaccines. Although the polls have closed and there’s apparent success for Pfizer’s COVID-19 vaccine, we continue to be in uncertain times. I’ll share some recent insights from Dr. David Kelly, Chief Global Strategist and Head of the Global Market Insights Strategy Team for J.P. Morgan Asset Management as well as some sage financial planning considerations for the next few weeks.

The pandemic slows economic recovery. People want to get back to normal. Some industries need more time to recover (leisure and entertainment, travel and restaurants). Vaccines can dampen the pandemic and there are 11 in Phase 3 trials. (Note: It normally takes up to a decade for the development of a vaccine. The quickest was the mumps vaccine which took about 4 years and launched in 1967). The first might be available by end of this month, bulk distribution is expected the first half of 2021, and the U.S. economy is expected to accelerate.

Divided government should bring a modest fiscal stimulus and limited to overall policy change. Currently it appears Biden is President-elect, there will be a Democratic House and Republican Senate. It may be harder for a party to force policies through the system and instead, compromise is needed – which may be good medicine for a divided America. Thus, tax increases and fiscal stimulus might be more modest. The Congressional Budget Office estimates a budget deficit of $1.8 trillion without another stimulus bill. Hard decisions eventually need to be made (e.g. tax but don’t spend), but it appears unlikely for the near term.

There’s broad U.S. equity and bond indexes don’t look cheap; could be more opportunity in U.S. value and international equities. Expect long term rates to rise when the economy accelerates later in 2021 and Feds stop buying bonds (i.e. print money). Additionally, the U.S. dollar is expected to weaken.

What’s this all mean to investors?

It’s important to remember where you’re going. Back to Dr. Kelly’s map analogy – two things are needed to plot a course: current location and destination. The present location is cloudy – election outcomes, policies, pandemic. But a moth is drawn to a flame. Here’s what you should consider doing:

  • Clarify your goals. What do you want your life to look like, what’s it going to take to maintain it (how much is needed), and when you do you want work to be optional (retirement date)?
  • Hedge your bets. Life’s full of surprises. That’s why you lash yourself to the mast of diversification whether it be in your business, investment strategy or packing for vacation. It’s trading “not making a killing” for the blessing of “not getting killed.”
  • Maintain your balance. Trainers push this concept in the gym. But it’s a good metaphor for life whether it’s doing things in moderation, actions have their consequences, and having others for feedback or to think things through.

As we come to the end of this road, I’d like to switch gears. How many times day do we face the question of “which way do I turn?” in our professional or personal lives? At Sage Financial Advisors, we’ve created a video series of interviews with successful professionals and thought leaders on business and life issues – we call it Sage Advice. Our first episode will be with Stephanie Kruse, founder and chair of KPS3 Marketing. We discuss life, planning for retirement, aging, entrepreneurship, money, being a business owner, charitable giving, and more. More information about how to watch is available on our social media channels and website.

While the paths following the elections and pandemic still have yet to illuminated, there’s light at the end of the tunnel. I encourage you to seek some sage advice and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal

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Sage Advice – Episode 1: Stephanie Kruse, KPS3

Sage Financial Advisors welcomes you to our first episode of Sage Advice, featuring Brian Loy, CFA, CFP of Sage Financial, with Stephanie Kruse, founder and chair of KPS3 Marketing. This is a fun, informative and thought-provoking session about life, financial planning, money, entrepreneurship, being a business owner and a woman, and choosing how to give to charities that mean something to you.

Check back regularly for more episodes of Sage Advice.

 

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Four Financial Must-Dos for Young Professionals

Young professionals have interesting challenges including career path, paying off debt, raising children, saving for retirement, and possibly assisting aging family members, among others. It gets even trickier when you have to do it all during a pandemic. Here are some financial tips to keep you on track.

One of the most important things you can do as a young professional is recognize that priorities shift over time. Flash priorities may emerge as life milestones occur and are inter-related. It might be a job change, buying a home or starting a family. Here are some priorities that you might bump into in the near future:

  • Health and family – Insurance plays a key role, especially during a pandemic and beyond
  • Reducing risk – Financial, business and personal
  • Advice – Technical (how to) and behavioral (help me make a decision)
  • Relevant solutions – Tax reduction, debt and credit, cash flow, etc.
  • Investment outcomes – Increasing returns and reducing risk
  • Legacy – Estate planning, and how your goals and values are in place for your family, communities and causes

What Issues Matter to You?

  • A healthy financial lifestyle – What is needed to help you demonstrate high financial literacy?
  • Preparing for a career shift – Nine out of ten Millennials expect to stay in a job for less than three years. Make a plan and be ready for the future.
  • Managing wealth in relationships – Financial decisions are a source of stress for eight out of ten Millennial couples. Have the talk with your partner and set yourselves up for financial success.
  • Investing in your development – Seven out of ten college graduates have student loans. A financial plan is key to paying off your debt, so why wait?
  • Buy versus rent decisions – Millennials are postponing home ownership. If owning a home is in your plan for the future, start preparing today.

Create a Financial Checklist

Update the Spending Plan

This is also known as a savings plan or budget. You know the important rules – spend less than you make (live within your means) and pay yourself first (convenience of payroll deductions to your 401(k) and savings plans). Remember to make adjustments. For example, the pandemic will end someday. How will your plan change – more income, vacation expenses, childcare, housing, etc.?

Debt Reduction

What opportunities are available at the current low interest rates? This includes refinancing, debt consolidation and financing new acquisitions. A goal is to lower your interest expense over the life of the loan. Consolidating a high interest short-term loan into a low interest long-term loan doesn’t always make sense. Here’s an alternative: Consider making extra payments if you’re consolidating an 8% ten-year loan into a home refinance loan at 3% for thirty years.

Start Accumulating (and Keep Going!)

A savings habit developed early will make your life easier and if contagious, is a good lesson for your kids. It’s never too late to start saving. Make a plan and start today.

Protect Wealth

Here are a few areas often overlooked, or possibly timely. Diversify concentrations of wealth such as employee stock options. Review and adjust life, disability and personal insurance as needed. What tax reduction opportunities exist related to previously mentioned stock options, or from tax loss harvesting and donating appreciated assets to charity? And what actions should you consider related to election results?

Life can be complicated, especially when one financial priority can have impact on others. Seek sage advice as needed and secure your future wisely.

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National Financial Planning Month – 3 Things Smart Savers Do

Fall is a dramatic change of seasons. It feels like time slows as we transition from the hustle of summer activities, put away the toys, harvest the garden and prepare for the coming winter. With transitions and the traditional back to school season, it’s no surprise that October is also National Financial Planning month – time to refresh our personal finances. I’ll share key areas of financial planning to review and three things smart savers do.

A good financial plan is holistic. Your goals often are being independent and having choices (financial freedom), not being a burden on anyone (the long-term), planning for life’s surprises both good and bad (uncertainty), and taking care of your loved ones (family).

Components of financially planning include:

  • Cash flow
  • Saving and investing
  • Tax reduction
  • Retirement planning
  • Insurance and risk management
  • Estate planning
  • Employee benefits
  • Business considerations

They’re inter-related. One area that becomes healthy (or stagnant) tends to cure (or infect) other areas. For example, focusing on your budget to eliminate debt generates surplus to build cash reserves (rainy day funds), to save and invest, and to build retirement. You may be very competent in some areas and DIY, and for others it may be better to hire an expert.

A key consideration when you delegate – in addition to expertise, experience and reasonable cost factors – is the personal relationship. You’re going to be sharing your most personal hopes and fears. You want someone who will ask the right questions, help you manage life’s transitions – and more importantly, anticipate them, and share relevant and valued resources.

Here are three things smart savers do.

Have a written plan

Denis Waitley said “Expect the best, plan for the worst and prepare to be surprised.” Writing down your goals increases the probability of success. And having a written financial plan provides a basis for accountability, milestones to be celebrated, and serves as a road map to keep you on track.

Develop great habits

Discipline, commitment and consistency go a long way whether it be relationships, work or personal finance. One of the biggest keys is managing cash flow and save. A favorite client says “We know how to save… not a penny, but a hundred.” History shows us that the fanciest investment strategy does not compensate for a lack of savings. And the best habits are often the ones we develop the earliest.

Have faith in the future

Life’s full of surprises both good and bad. Sometimes when times are toughest is when it’s best to put your head down and grind it out. Control what you can and forget about the rest. Thomas Malthus was an 18th century economist best known for his theory on overpopulation. He believed that mankind would perish because population growth would outpace food production. He and his followers, known as Malthusians or pessimists, exponentially grow the problems and straight line the solution. They fail to consider mankind’s ingenuity and creativity – in this case advancements in food productivity. Often, we’re at our best when times are darkest.

Your financial success depends on you taking action. Seek sage advice at any age and secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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