Solano Real Estate Scene: Be sure to pay yourself first
My employee teammates, friends and readers know how I feel about the importance of rebuilding the middle class. I have written many columns these past few years about numerous concerns I have found through my research.
The Federal Reserve survey in June 2019 stated that 40% of the people in the United States couldn’t come up with $400 in 24 hours. The Nerd Wallet commentary in December 2019 stated that 65% of the country couldn’t find $1,000 in the event of an emergency. That, combined with the fact that 52% of everyone over the age of 55 has no pension, IRA and 401(k) are just a few of the problems we will have to deal with in the future.
Ten thousand folks are turning 65 every day and thanks to new medical advances and so many of us quitting cigarettes over the past 40 years, people are living much longer than we did in 1980. The cost to support seniors over the next 40 years will be astronomical.
Public school education reform and more focus on a financial literacy campaign for kids and the 65% of the population who have no money or net worth needs to start now.
The number of Americans who have master’s degrees and doctorates has quadrupled in the past 20 years thanks to our focus on STEM. The exceptional students who are academically motivated and do three hours of homework nightly will be fine, but most kids are not going to be engineers, doctors, CPAs or lawyers.
We need to teach carpentry, plumbing and other trades that will be potential careers in the future, including things like sales training and internet marketing in high school. Millions of good people will be laborers, housekeepers, retail salespeople and janitors, which are all jobs that will require households to have two incomes just to pay the rent or mortgage payment.
I attended a seminar in the late 1980s that turned my life around. In 1988, and after making an average of $50,000 per year since 1978, Mary and I had four little kids and no money in the bank or in the stock market. The speaker at this seminar asked the crowd, “What is more important to pay monthly, your phone bill or yourself?” The speaker in 1988 was not Robert Kiyosaki but later in the ’90s I listened to the recorded version of his book, “Rich Dad Poor Dad,” which emphasized the importance of investing in income-producing assets.
This Robinhood company is a great thing and millions of young people have begun to invest in the stock market.
My suggestion for all my kids and employees is to pay yourself first and do this as if it were an obligation to a creditor. Pay yourself like you pay your darn cellphone bill because if you don’t pay your phone, it will get disconnected and if you don’t pay yourself, you will end up at 68 with nothing other than Social Security, and you better hope to God you own your home free and clear because rents will be high in 30 to 40 years.
Make this a habit starting in first grade for your kids, open an account for your child, whether it is a 529 plan or just a regular custodial account using their Social Security number. When they get $50 for their birthday, invest 20% of this in an investment.
Now, you can open a Charles Schwab, Edward Jones or a Robinhood account with as little as $25. Kids are smart and once they do something for a few months, it becomes a habit. Your child can own Disney or one of the many video game companies rather than just spend money on buying a new Xbox or PlayStation.
Adults must maximize their IRA and 401(k) every month and make sure they pay themselves first because no creditor is more important than you and your family’s financial security and success.