Sequence Risk Is Like Your Drunken Friend

Whether you’re retiring in your 40s or 70s, the biggest risk to your post-work wealth is what’s known as sequence risk.

It’s the threat that a recession or downturn will hit at the beginning of your retirement, instead of a few years in. Experiencing a downturn right as you begin to tap your portfolio for funds can deplete its ability to grow at the rate you need it to during your retirement. 

Say you and your friends decide to go out to the bars. You know you plan to have a few drinks, mingle with your buddies and maybe meet some new people.

As you enter the bar, there’s the risk that one of your buddies started much earlier than you. It’s possible that they’ve already drunken far too much, causing a disturbance, bothering people and getting sick. Right as you enter, they’ve already sabotaged your night. Instead of having a few drinks and laughs, you’re stuck…

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The Power of 1

Think small changes can’t make a difference in your finances? Then think about the power that the lowly number 1 has in building your wealth.

By upping your savings rate by just 1% a year, you can increase it from 10% to 20% in ten years, vastly improving the probability you can safely retire one day.

Saving $1 more per day can save you $30 more a month, and $365 more a year.

Having one car versus two can save you over $800 a month, on average, or nearly $10,000 a year.

A difference of 1% in investment fees can result in a difference of hundreds of thousands of dollars by the time you retire.

Imagine…

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My Money Regrets

Why didn’t I invest more in my 20s, when the impact of compounding would have been even greater than it already will?

Why didn’t I ensure I earned the company match in my first 401k, losing out on the free money?

Why didn’t I look towards homeownership earlier since it’s one of the best buys of my life?

Why didn’t I read more, beyond the basics of finances, as my professional career began?

Why didn’t I diligently budget when I…

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Take Ownership

When we don’t understand something we’ve learned to outsource the problem.

We don’t understand website design then we pay someone. We don’t understand a home repair then we hire a contractor. We fear tax time then we tap an accountant.

Outsourcing basic finances, though, helps those in the financial services industry make such large incomes.

They sell you with no fees, hiding the fact they’ll sparse out your future into bad products that pay them a commission.

They sell you insurance…

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Test Your Savings Rate

Entrepreneurs test like crazy. They test the different prices for products they sell. They test different marketing tactics. They test different technologies. They probably test different clothes they wear. They -- seemingly -- test everything.

Why don’t we do the same when saving?

Think you can only save 5% this month? Why not try 10%? What’s the worse that could happen? If you can’t make it without putting your family at harm, then simply tap the funds you planned on not spending.

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