Sep 27 2011
Tips To Build Wealth For Early Retirement - Part 2 of 2
How To Retire Early and Wealthy
by Todd R. Tresidder
visit Financial Mentor to view the complete article
Retirement Planning Tip #5: Put Your Wealth Building On Auto-Pilot
The easiest, least painful way to save your way to wealth is automatically. Arrange you finances so that every month certain actions take place that automatically grow your assets without any decisions or extra effort on your part. This creates an enforced discipline to keep you on track. Below are a few examples:
1. Own Your Home
2. Rental Real Estate
3. Tax Deferred Retirement Plans: Maximize your contributions to your tax deferred retirement plans so that the money comes out of your paycheck automatically before you ever see it.
4. Automatic Savings Plans
5. Join An Investment Club: the social support, regular learning, and forced savings will assist putting your wealth building and financial intelligence on auto-pilot.
6. Subscribe to Educational Investment Newsletters
You can either choose to arrange your life so that growing your wealth and financial intelligence is an automatic habit, or you can let time slip away and allow procrastination to win the day.
Retirement Planning Tip #6: Responsibility For All Your Investment Result
Unless you are a trust fund baby or win the lottery, the way you will become wealthy is by owning full responsibility for every aspect of your wealth. This causes you to get into action and correct and adjust your plans until you reach your goal. You must build your wealth like an entrepreneur builds a business. “If it’s got to be, then it is up to me.”
You are solely responsible for organizing your life so that wealth accumulation is a habit. Nobody else will do it for you. You are the one that determines the priority of your spending habits and whether your lifestyle lags your income or not. You are the one who determines whether you start today or procrastinate until tomorrow. When you take the right actions with consistency it will get you the desired result. Early retirement and financial security becomes a question of “when” - not “if”.
Your financial bottom line is you make the decisions: you are responsible. You own the results. That is the only way to achieve true financial security.
Retirement Planning Tip #7: Commit What Is Necessary To Succeed
Successful retirement planning requires you to provide the necessary resources to reach the goal. Don’t set yourself up for failure by under-committing.
In short, you must set yourself up to win by designing your retirement plan consistent with the time, money, and energy required for success, and you must be willing to commit those resources to the process. Every person’s situation is different and successful retirement planning must reflect that. One size does not fit all.
Is your wealth plan uniquely fitted to you?
Retirement Planning Tip #8: Make Your Money Hard To Reach
A pile of savings that is easy and pain free to reach is an easy solution to life’s troubles. Your car breaks and you use your savings to buy a new one. You get laid off and use your savings to carry you through until the perfect job arrives. Life throws you curve balls and savings without barriers to protect them are an easy target for solution.
That is why I love the government sponsored retirement plans with all the difficult rules and penalties you must overcome to access your money prior to retiring. These obstacles provide a measure of discipline for those who inherently lack this life skill. Even if you have the discipline of a celibate monk the rules and penalties provide a formidable barrier for your inevitable moments of human weakness.
The rule is simple: when you build a nest egg, don’t raid it.
Retirement Planning Tip #9: Risk Management Is Essential
The mathematics of compounding wealth prove that avoiding large losses is equally as important to the growth of your wealth as pursuing large gains. They are mathematical flip-sides to the same coin - growing money. For that reason smart investment strategy manages risk of loss and volatility risk using a variety of tools including diversification, careful asset selection, valuation, and a sell discipline to create a defensive investment plan.
While it is essential to practice defensive investing through risk management it does not mean you should avoid risk altogether by hiding out in Treasury Bills or other so-called “safe assets”. You must have an aggressive, offensive investment strategy to build wealth because your objective is to grow your assets faster than inflation erodes them so that you increase purchasing power. Hiding out in safe investments won’t achieve that goal
Retirement Planning Tip #10: Use Your Common Sense
Investing is really about business. You can avoid most of the speculative manias and frauds that can rob your retirement plan of valuable principle by following this simple rule: the price you pay for any investment must make economic sense consistent with the earning capacity of the underlying business that you invest in. In other words, valuation matters - it is a primary risk management tool.
It is just business common sense to only pay for investment services that put more money in your pocket than they take out. They must be value added. For example, a broker or money manager’s fees can only be justified when his insights and services add more profit than they cost when compared to a passive index investment strategy that could be easily implemented on your own. Again, it is just business common sense. You need to get what you pay for.
Retirement Planning Tip #11: Basic Estate Planning
It is irresponsible to leave a burden for those you leave behind. The fact is you will die with 100% certainty. Your loved ones will be distraught over your passing, busy with their own lives, and will not want to clean up a messy financial legacy.
Get your affairs in order and make all the decisions about who gets what now. Depending on your particular circumstances this might include:
- Powers of Attorney
- Will
- Living Trust
- Life insurance
- Much more depending on your circumstances and desires
Retirement Planning Tip #12: Get A Life
There’s more to retirement planning than just money. What about relationships? What about your health? What activities engage your interest?
Money is just a lubricant to life, but it is not life. Happy retirees have fulfilling lives with the health and money to enjoy them. Make sure you have plenty to live for when your work no longer fills your days, and make sure you take care of your health so that you have the energy and vitality to pursue whatever brings you joy.
Protect and enhance your health by investing daily in proper nutrition, regular exercise, and preventative health care to reduce the risk of catastrophic illness. Get adequate sleep, avoid stress, and counteract the stress you do incur with proper exercise and recreation. We never realize the value of our health until we lose it.
In Summary:
Financial planning for retirement is simple to understand and hard to live. That is why so few succeed at it. It all boils down to prudent, routine management of your investments and personal finances - not exactly rocket science. The principles are not complex.
The only question now is “are you walking the talk?” You may know most or even all of these principles, but how many are you actually living right now? That is the key question.
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.










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