Does Your Financial Strategy Account for Inflation?

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What is your financial strategy to keep up with or outpace inflation?

Thanks to modern medicine, you’re going to live longer and you may need two or three times your current income in the future just to maintain your current lifestyle.

I cannot stress this enough:

If you need to have $70,000 annually to spend, you need to have a strategy to generate an income of $140,000 to $210,000 per year over the next fifteen to twenty-five years.

The best way to avoid being eaten alive by the inflation rate monster is to know your personal inflation rate.

You can do this by tracking your expenses from year to year. I’ve found this more effective than keeping a budget.

If you’re going to keep records of where you spend money, keep them so you can see how the lifestyle you lead is increasing in cost over time.

Don’t feel too bad, however, if you haven’t done this. Most people, including myself, haven’t tracked expenses accurately enough to understand what our personal inflation rate is.

If you’re not going to keep careful track of your spending, assume a high, but still realistic inflation rate estimate.

This will allow you or your financial advisor to do cash flow calculations to determine how long your money is going to last and whether or not you have enough savings to last for your lifetime.

Know all of the risks, like inflation, that can have an impact on your Incredible Retirement by signing up to receive our free 5-part e-course.

Be Happily Debt Free

Debt Free

The single biggest obstacle to building and keeping wealth is debt.

That’s right—debt! If you’re paying an increasing amount each month to pay off loans or credit cards, you are in good company.

The average American carries an estimated $10,000 in credit card debt.

Regardless of your circumstances, try to imagine having no credit card, car or mortgage payments. I bet you’re seeing a pretty good picture!

When you eliminate debt from your life, you reduce the amount of income you need to earn from your investments. This gives you increased freedom to be more conservative with your investment holdings, since you won’t need to earn as high a return on your holdings.

You’ll be able to accomplish your goals but probably with less stress because you’ve invested in lower risk choices.

If you’re lowering your risk proportionately, then lower investment returns may well be acceptable to you. If lower returns come along with less stress and increased peace of mind, then this strategy may be the one you should be choosing.

People without debt worry less about their money.

I say this with assurance, from first hand experience, having had conversations with more than 700 retirees!

If you haven’t done so already, one of your principal goals should be to become totally debt free at or before retirement. If you have debt, get rid of it before you do any other investing.

If you have investments and debt, sell your investments to pay off your debts. Then take the added cash that you will have each month to build back up your investment accounts.

For more information on how to experience an Incredible Retirement, receive our free 5-part e-course.