By Ed Rempel, CMA, Fee-for-Service Planner
Special to the Financial Independence Hub
There was a gasp from the audience, when this photo of a homeless woman was shown at a talk I recently attended.
A new survey shows that almost half of women fear they will become a “bag lady” someday. They fear being financially desperate and living on the street.
No job. No income. No partner. That is the fear.
I have asked thousands of people: “What’s important about money to you?” The #1 answer for women is security.1
What does “security” mean? It’s surprising how often the “bag lady fear” comes up. The #1 explanation is similar, but less severe:
Security: “Having enough so I never have to worry about money.”
Women want to know there will always be enough income for their family, for emergencies, and for the things that are important to their lifestyle. They want to focus on their life, their family and their friends and not have to constantly worry about whether they can afford it.
What does that look like and how do you get there? The answer might surprise you.
First, three questions:
1.) Jennifer has $2 million in stock market investments. This is:
A. Very risky.
B. Financial security.
2.) Financial security is:
A. No debt and safe investments.
B. Large diversified portfolio.
3.) Who is more secure?
A. Mary has no debt.
B. Andrea has a $200,000 mortgage and $1 million in investments.
Whether you ever become financially secure depends a lot on your picture of financial security.
Most people who want security do exactly the opposite of what they need to do to get it. The biggest mistake most people make is to think they can be financially secure by paying off all debt and having safe investments, instead of investing wisely for long-term growth.
I call this the “Zero Plan.” You retire with zero debt, zero investments (nearly), and zero income (except a bit from the government). People who do this are actually making it hard for themselves to have the nest egg they will need to be secure.
The truth is, investing very little money and buying low-return investments means you will never build up much of a nest egg.
What does financial security look like? What I have learned from experience helping thousands of people become financially secure is this:
Real security comes from having a huge nest egg.
A large portfolio of equities (stock market investments) is financial security. That’s what security looks like. Continue Reading…