You’ve screwed up:
- You’re drowning in debt.
- You haven’t saved for retirement.
- You’ve chopped yourself to bits in the stock market.
“Too late now, I’m screwed.”
You are NOT screwed. There is a way out. The only way you are screwed is if you are at retirement age already—then it is kind of too late.
But if there is any time on the clock at all, you can fix this. You can make it right.
I know many people who got to age 50 and didn’t have a dime saved for retirement. And then they staged the greatest comeback of all time, and retired comfortably.
You can do it. But there is only one solution for this. There are no shortcuts. There are no ways around it. You have to do it.
The answer is:
Austerity is defined as “conditions characterized by severity, sternness, or asceticism.”
“Asceticism” is an even better word. If you want to retire comfortably, you will have to live like an ascetic. By choice. Or else you will be in your 80s, living like an ascetic, not by choice.
As I’ve said before, I know people who have partied it up well into middle age, then said, “oh crap, I don’t have anything saved for retirement.”
This is super common. The people who start at age 23 (like me) are actually not very common. In 1997, I was buying issues of Money magazine out of the bookstore and picking out mutual funds.
Most people screw around into their 30s and 40s and don’t figure it out until they are already well behind schedule. Some people don’t figure it out until their 50s.
So what does this austerity look like?
You will have to start saving 50% or more of your paycheck every year.
Sound bad? Hey look—if you started when you were 23, you could get by with saving 10-20% of your paycheck. Now you have to double up to catch up.
But the point here is that it can be done. So many people get to this point and they just say “screw it” and give up, and figure they’ll live off social security, or that their kids will take care of them. That is not a very good plan.
I know someone currently in this position. His mom ran out of resources in her late 70s and the kids have to pitch in to bail her out. It is embarrassing and awkward for everyone—especially because it was preventable.
Look on the bright side. Saving money can be fun, too. I derive satisfaction out of socking money away. Most of the time, investing is fun. It has been pretty easy the last 10 years.
Let me insert a PSA here for taking Social Security later, rather than earlier. 50% of the population takes Social Security at age 62. Only 2% takes it at age 70. Your monthly checks are literally twice as big if you wait until age 70. Plus, you will have worked an extra 8 years, so you’ll have more money kicking around.
62 is not very old. You can, and should, keep working.
Being poor sucks. But there are few things worse than being completely destitute in old age. That was the whole motivation for Social Security, which has turned out not to be enough. This is real! People suffer!
Time to get serious.
It Fixes Everything
Austerity fixes all your problems:
- If you’re drowning in debt, you’ll be able to pay off your debt
- If you haven’t saved anything, you’ll be able to put something away
- If you’ve screwed up your investments, you can make up for the shortfall
This is probably the first issue of The 10th Man where I transition from public intellectual to motivational speaker. Quoting Rob Schneider from The Waterboy, “You can do it.” I have seen it done.
When properly motivated, people are capable of saving and investing. Almost nobody is motivated to do it at age 23. Pretty much everyone, at some point in their life, will end up in catch-up mode.
When I said there are no shortcuts, there are no shortcuts. If you reach for more risk in the stock market, there is a very good chance that you will only compound your error.
If you make $100,000 a year, you can save $50,000 of it.1
If you start at age 45 or 50, you can make up for lost time with a little bit of compounding. You obviously won’t do as well as if you had started earlier, but it’s better than doing nothing.
I spend more money than I used to, but I have spent most of my life in some state of austerity.
Austerity has enabled me to do a few really good things:
- Survive my firm’s bankruptcy and loss of restricted stock.
- Start a business in the middle of the financial crisis.
- Buy real estate at really opportune times without a lot of leverage.
Wouldn’t it be nice to deal from a position of strength, rather than a position of weakness?
Yes, yes it would.
Dealing from a Position of Strength
As I said earlier, people are capable of saving and investing when properly motivated. I sincerely hope that this issue has helped you look at your situation a bit differently, whether you’re 23 or 43 or 63.
And if you already have the austerity thing taken care of, and want to take care of the “investing” part of the equation a bit more… great!
In that case, you might want to take a look at what I’m excited about right now. We’re close to the start of the uptrend in an asset class and I haven’t been this bullish about it since 2009—but it’s a bit of an embarrassing trade.
If you’re interested, check this out.
1 Half the people reading this said “no you can’t.” Actually, yes you can.
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