
By Doug Charney
Many of us start our careers believing we’ll retire as millionaires, but we do little to help make that belief a reality. That’s why a dangerous fantasy is not in disbelieving in the pot of gold, but in believing that somehow it will just appear when we need it through no effort on our parts. In fact, I believe we have two choices. We can work for that pot of gold through discipline and perseverance throughout our careers, or we can end up working part-time in our golden years just to survive.
I’ve seen many retirees have to work at least part-time. They believe when they retire that their $100,000 in savings means they have a lot of money, but they fail to see it’s not nearly enough to live on. Many people plan for their nest egg to run out at about age 65 to 70, when they feel they will not need it any longer. Actually, most people mispredict how long they will live. According to the Centers for Disease Control (CDC), the average man lives to be about 75 and women live to be about 80. (Health, United States 2005, Table 27, National Center for Health Statistics, Nov. 2005)
Here are eight steps designed to help you achieve financial independence so that when you retire, you may be able to find yourself asking, “Will you please pass the suntan lotion?” instead of “Would you like fries with that?”
1. Start now.
2. Choose a competent advisor.
Choose your financial advisor carefully, interviewing several and looking for compatibility with you and your goals as well as integrity, accessibility and the ability to bring a variety of products to the table, not just one company’s. Once you have picked out an investment advisor, lay all your cards on the table and work together to develop a plan to achieve your financial goals.
3. Educate yourself.
4. Pay yourself first.
Invest your money before you spend it. Treat your investment program as another necessity, along with food, shelter and transportation. When you sit down to pay bills, write the first check to your investment program. Or set up an automatic deposit system to put money from your checking account into your investment plan.
The old rule of allocating 10 percent of your income to investment still stands if you are starting to save early enough. If you are starting to save later in life, you will generally have to contribute a lot more than 10 percent in order to make up for years of not saving. Your best first investment should definitely be your employer’s retirement plan, which enables you to invest while receiving the advantages of tax deductions as your money grows, tax-deferred.
5. Choose your investments carefully.
Always be sure your investments match your objectives. If you’re seeking a long-term capital appreciation, then you may want to consider growth-oriented investments such as international and domestic mutual funds. (Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and political and economic changes. This may result in greater share price volatility.) If you’re retiring and seeking a monthly check from your investments, consider selecting those designed to produce income, such as balance funds (part stocks and part bonds) or bond funds.
In my view, slow and steady wins the game! Be consistent and stick with your program. Rather than chase after last year’s hot mutual fund, I believe you should look for those mutual funds that have a long-term consistent track record (although past performance is no guarantee of future results).
6. Spread your risks.
Working with your financial advisor, allocate your assets among several different mutual funds and different industries. This diversification of your investments can help to reduce the volatility of your portfolio. As you set it up, ideally, your portfolio will contain companies of all sizes, international and national companies, and bonds. (The prices of small- and mid-company stocks are generally more volatile than large company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.) By not putting all your eggs in one basket, you are more likely to get a more consistent return on your investment. Moreover, international diversification can enable you to participate in an expanding world economy. Keep in mind that diversification cannot eliminate the risk of fluctuating prices and uncertain returns.
7. Be an owner, not a lender.
8. Avoid temptation.
You don’t have to be a doctor, attorney or high wage-earner to achieve financial independence, pay for your child’s college education or even take an early retirement. People with moderate incomes and modest lifestyles often retire with enough money to support themselves during retirement. By following these eight steps and investing regularly and with discipline, I believe you’ll not only be able to potentially improve your financial situation, you may also become a financial role model for your children and future generations. I believe that if the rich really do get richer, it’s not because of opportunity so much as because each generation instills in the next the skills that it takes to make and save money.
Doug Charney is a senior vice president-investments with Wachovia Securities in Harrisburg, PA. For more information, he can be reached at: 1-888-529-2973.













