Eye-opening ways spending habits now can derail a comfortable retirement later

Published: Sep. 13, 2023 at 5:36 AM CDT
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HUNTSVILLE, Ala. (WAFF) - It’s important for consumers to understand how their short-term desire to spend now can impact their long-term goal of saving for a comfortable retirement.

Financial expert, Marshall Clay from The Welch Group explains a concept that could help people put more money in their wallets, instead of wondering where it all went over time. Specifically, Clay is talking about the “Time value of money.”

That’s the idea that money is worth more now than later because of the earnings potential. Clay is passionate about getting people to understand the impact their present-day spending has on long-term financial health.

That’s because of a few alarming statistics. “About 50% of American retirees have zero savings. I’m not talking a $100, not $1,000, but they don’t have any savings whatsoever,” Clay explains. “What’s even more staggering is that 80% of U.S. retirees have less than $100,000.”

Clay chalks it up to a savings crisis in America. The wealth management expert says his concept works in reverse when it comes to spending money. “Money spent today denies future earnings potential,” Clay explains.

The Certified Financial Planner then gave an example most of us can relate to when it comes to the true cost of today’s consumption of streaming services. Clay threw out the number of $15 per month on a streaming service, which comes out to $180 per year. Now here’s where things get out of hand. “If you extrapolate that over 40 years if you’re 25 years old and you pay the subscription services for forty years and you just apply it in the average internal rate of return of the S&P 500, for example, 7. 52%, you get to a true cost for your streaming subscription of $45,616 over the course of a lifetime.”

He explains when you’re making small monthly payments, it feels digestible. But when numbers reach over $40,000, it gets harder to swallow.

Clay’s main advice is to cut back on whatever you can so that you set yourself up for a healthy financial future.

For more ways to stay financially savvy, visit The Welch Group’s website.

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