MONEY matters

With the stock market finally showing us some love after a brutal 8-9 months of wild rollercoaster rides, it’s easy to slip into old habits and trick yourself into thinking the good old days are around the corner. As President Obama said today, there are glimmers of hope that the economy may be turning a corner. Add to the mix a general consensus form many leading economists that the recession may end in September and you have a positive outlook for the future.

If you’ve been saving money, maybe for the first time in a while, but you sense the stock market is headed back up so you’ll take it easy and put your newly found saving habit on hold, please reconsider. If you have been flexing your frugal muscle and now with some good news from the market you’re feeling that familiar pull to spend, stop, think about what you’re spending the money on, is it a need or a want, can you live without it for now, and then go back to saving more.

With the stock market sinking daily, it’s hard for many investors to stomach the thought of putting money back into the market. That’s totally understandable. As a short-term strategy, many people are keeping their cash in money market accounts or short term savings accounts. If that helps you sleep at night, then that’s what you need to do. But eventually, things will stabilize, markets will go back up, and you’ll need to start planning for your prime years. With average life expectancy at 90, earning less than 2% on your investments over the long term is a riskier strategy than you might imagine.

Most people, even with the best of intentions, usually spend pretty close to what they were spending prior to retirement. Many of my clients that have officially stopped working for money actually are surprised to discover that they are spending more than when they were working full-time. This is why planning for the prime years of your life, formerly known as the golden years, (prime just sounds better), is so essential to future financial security.