In a previous column, I discussed National Geographic Fellow Dan Buettner’s exciting new research on the “Blue Zones,” home to the world’s happiest and longest-living people.
And while money doesn’t always lead to a longer and more satisfying life, it certainly doesn’t hurt.
For example, in a Gallup-Sharecare study, nearly 90% of people who were managing their finances well said their relationship with their spouse or partner was strong.
Yet when finances were cited as a sore point in the household, the number of happy relationships plunged to just 60%.
Moreover, it didn’t matter whether the couples were affluent or not. Money troubles create relationship troubles.
I’ve seen plenty of couples, for instance, where one was an avid shopper and the other a dedicated saver. That’s a bad combo.
I knew another where one wanted to tap into retirement savings to get a new boat – or remodel the kitchen – and the other felt strongly otherwise.
Things went decidedly south from there.
Financial compatibility – or at least peacemaking compromise – seems to be a prerequisite for connubial bliss.
Arguing and worrying about money is toxic. It creates stress and conflict.
Yet when a household’s finances are managed smartly, relationships improve.
Studies show there is even an inverse relationship between wealth and obesity. Financial well-being, it turns out, even helps keep you slim.
(An important consideration since obesity is highly correlated with hypertension, heart disease, diabetes, stroke, dementia and some forms of cancer.)
Yet in the 2020 Retirement Confidence Survey, the longest-running survey of its kind, only 27% of workers said they were very confident they’d have enough for a comfortable retirement.
(In fact, only 30% of current retirees are very confident they have enough.)
This isn’t terribly surprising when you consider that 32% of Americans have no savings – and 58% have less than $1,000 set aside.
This is a national tragedy, one that will have serious ramifications down the road when nonsavers petition their elected representatives to redistribute the incomes of those who have saved and invested.
Don’t get me wrong. Some people are poor due to bad genes, bad luck or circumstances beyond their control.
But can this possibly describe the nearly two-thirds of Americans who haven’t saved for a rainy day… much less up to three decades of retirement?
Especially when financial independence requires only three things:
- A basic understanding of what happens when money compounds
- A resolution to save and invest regularly
- The discipline to follow through.
Here’s an example…
Up until you’re 25, your need for a home, transportation, healthcare and other expenses may take every penny you earn.
But starting at age 25, let’s say you invest $190 a month in an S&P 500 index fund and earn nothing more or less than the market’s long-term average annual return of 10%.
With dividends reinvested, that would turn into $1.02 million by age 65.
That’s right. Just $190 a month is all it takes to go from flat broke to millionaire status.
According to the U.S. Census Bureau, the median household income in this country in 2018 was $61,937.
So $190 requires the average household to save just 3.6% of its income – or less than 5% post-tax – to hit the seven-figure mark in 40 years.
Even if a household could save only $95 a month, it would still turn into a half-million dollars in 40 years.
(And if they bought a home – and didn’t pull out and spend the equity along the way – that would likely get them the rest of the way to millionaire status.)
Saving. Investing. Compounding. Building equity.
It’s so simple. Yet many Americans never get out of the starting blocks.
A major reason is too many people decide they’ll start saving after all their wants and needs are met.
That doesn’t work.
We live in a wonderful free market system where companies knock themselves out to bring us a constant array of exciting new products and services.
If you plan to start saving after all your family’s desires are met… well, good luck with that.
Here’s the bottom line: Financial freedom doesn’t just provide you with security and peace of mind.
As Dan’s research reveals, your health and happiness may depend on it as well.