Debt Fast Track

Building a better retirement during financial uncertainty

Retirement planning is perhaps the biggest casualty of the recession.  Those who have been hurt by a loss of income have often liquidated retirement funds to cover the spread.  Using retirement savings has helped many families survive without falling behind on debt payments and other budgetary items.  However, this is usually only a short-term strategy, and many are coming to the end of the road.  If you find yourself in this situation, it is critical to make long term adjustments.  Incomes are not likely to improve over the short- or medium-term in this economy.  Making the proper financial adjustments now can lead to financial security and restored retirement savings sooner than you think.  Not making the adjustments will only prolong the pain and financial stress, perhaps for the rest of your life.  By changing a few non-essential things in your financial life, chances are good that stress can be reduced, savings can be built, and financial security can once again be yours.  Today is as good of a day as any to get started.  Over the next few weeks, the focus of this blog will be to concentrate of what can be done to make long term adjustments to ensure financial security in a down economy.

Our lifestyle going into the recession was based upon the income that we made during the good times.  During bad times, we see that consumers actually become a little bit more responsible.  Those whose incomes were not affected by this latest recession actually increased savings and reduced debt, as they saw those around them suffer.  Those who lost income, generally expected a quicker recovery.  They are the ones who depleted resources to hang on to the pre-recession lifestyle.  Expenses for this latter group has generally been reduced as far as non-fixed expenses are concerned.  Fixed expenses, of course, are a little bit more difficult to change.

Most middle-income to upper-middle income families have relied on a few easy sources to build their retirement accounts:  401k, IRA, Mutual Funds and, of course, Social Security.  Any funds built up in personal retirement savings plans are often depleted or gone altogether for  families have suffered income loss through the recession.

It will not comfort you to note that any of the supposed retirement funds built up in Social Security have long since been used for similar reasons by the US Government.  The government has “borrowed” freely from Social Security over the years, giving what amounts to IOU’s in return.  Much in the same way that  a family often does not view their 401k loans as a real loan (they are, after all, borrowing from themselves), the government does not count their IOU’s to Social Security as real debt.  You will find no accounting of this debt in our staggering federal debt numbers, because it is simply money that has changed hands between government entities.

Families and the government know, deep down inside, that once money is used, it is very hard to return.  So, it is time to stop kidding ourselves about social security supposedly being solvent through 2043, as some of our lawmakers are proposing as an argument against reform.  It is also time to move on from some of the 401k losses.

The fact is, reform is needed.  Good luck getting any kind of meaningful reform out of Washington DC.  Few in government are willing to risk political capitol when they know that reform with be painful and unpopular.

Reform at home is no different.  Changing your attitude about home finances is difficult, as you go through the painful process of eliminating non-essential items from your budget.  Spouses and children have a different viewpoint of what is and is not important in a family budget.  Heated arguments, sadness, anger, and threats are all a part of the process.  Yet, it is all necessary in order to start on the way of healing.

The way to healing is worth it, however.  Our home and federal economies and be fixed by using the proper “austerity measures”.  The short term effects are often painful, but the long-term rewards of security and eventual prosperity is well worth it.

Keep posted.  Our blogs over the next few weeks will focus on making meaningful adjustments to your home finances.  It is time to quit surviving, and making the proper financial adjustments for a secure future.