How Much is Enough Money?

By Crystal Harvey

I have been in the real estate industry for over twenty years.  I have always known that I would remain in this business in some capacity for the rest of my life.  I have a passion for all that is real estate.  I have continued to educate myself and learned many, many things over the years.  Lately, as I have talked with people at various forums and educational seminars, the same question comes up over and over again: “Will I have enough to retire comfortably?”

There are thousands of books written on the subject.  I just recently finished one called The Millionaire Real Estate Investor by Gary Keller. This book made me look at investing in a very different light.  Although the purpose may have been to educate people on the wiser techniques of real estate investing, I came away with wanting to under-stand more about arriving at the financial number I need to establish now in order for me to receive the amount of monthly cash flow I would need to sustain me in my golden years.  Not to mention the college education that I need to fund for my child.

About a year ago, I also read a book called The Number by Lee Eisenberg.  The focus of this book is exactly what I am writing to you about now. The author talks about how people derive “the number.”  He goes through many scenarios with different people and gets to the realities and the fantasies that people have reached on the subject of money and finances.  In one scenario, he explains that if a person does not have a clear picture or a plan that would lead them to have in excess of $1 million dollars in net worth, then there is no way that that person should be driving a $100,000 car or have a second home.  This blew me away.  However, his point was that if money is not wisely invested and there is not more in assets than there is in debt, then that million dollars would be long consumed before the person would be able to retire.  These are along the same lines as The Millionaire Real Estate Investor in that as a society, we must think of ourselves more as investors versus consumers.

I learned early on in my career in dealing with people to never judge by appearance.  Often there is that split second summary that our natural eyes tend to make when we encounter others.  As an example, a client walks in and he is in a plain t-shirt and blue jeans that had not really been blue for quite some time.  He comes into an office and is in need of service.  No one approaches this gentleman.  I walk up to him and ask if I can be of service.  He appears grateful and we sit down.  It appears that this man is in a high-powered corporate position.  He actually apologizes to me about his appearance.  He tells me that he is normally in the “power suit” but today was the first day in months that he was able to relax and dress casually as he was doing some much needed shopping.  He told me that he is in the market and to make a long story short, he purchased and closed with me!

So, I said all that to say this: consumers spend, investors earn. You cannot simply tell the difference between the two just by looking at them. There are many vehicles you can use to make sure that how you spend your time and effort now will undoubtedly affect how much you will have to live on when the time comes.  There are many people in society that can appear to be rich/wealthy.  However, to sit down and take a real analysis of their financial position may expose their real status of the compulsion to consume versus the healthy picture of a savvy, well-informed investor.  In short, until the real picture is truthfully clear, don’t believe the hype and surely don’t just go by what you see.

I have spent the better part of this month and last month finding out about the different types of financial opportunities out there for the taking.  Real estate, money market accounts, stocks, bonds, tax deferment vehicles, mutual funds, self-directed IRAs, and the list can go on.  There, of course, are a lot of people that understand these concepts and use them daily.  They are called investors,  millionaires, heirs, and leaders. There are also many people, the vast majority if you will, that have no clue.  They spend two dollars for every one that they make.  They go broke literally “looking” wealthy.  These people can be politely and respectfully called consumers.  Some of my best friends are consumers.  I once had this mind set. When I first got in the business, it was a part of my “fake it ’til you make it” strategy to becoming successful.  However, after enough overdrafts and maxed-out credit cards, I’ve learned. Knowledge is power and now I know better.

I recently met a young man who is in the financial services business that told me that 6 out of every 10 families do not have life insurance outside of their jobs. He further informed me that in his experience in the market, most people that he encounters do not know that they can set up a college fund or a mutual fund for their children for as little as $25 a month.  Furthermore, it is sad to know that many only understand the workings of compound interest over time as it pertains to mortgages, if they have a mortgage, or as it pertains to the credit card debt that is killing them slowly on a monthly basis.  He told me that it never ceases to amaze him that when he initially starts talking to people that their immediate response to setting up such financial vehicles as life insurance, college funds, or mutual funds, is that they could never afford to do it.  Yet, they spend more than these three things would cost at a minimum for their cable bills, cell phone bills, or lottery each month.  Some people spend more money to insure their car or truck that sits outside than they are even willing to spend to protect their families if part or all income streams dry up.

So, I will continue to ask the question, will I have enough to retire comfortably when the time comes?  However, with each dollar I make, I will also invest in some vehicle that will have those dollars working for me to have the answer be a resounding YES. I hope I have gotten you to think more like an investor and less like a consumer. We all know and should understand from our childhood days that those things in life that are good for us are often painful.  Yet, we learn to appreciate them in the long run.  Will you have enough from your investments to retire comfortably when the time comes?

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Crystal Harvey is a licensed real estate broker and pre-license instructor.  She is a member of the Real Estate Broker’s Investment Group, REBIG.  She can be contacted at Crystal.Harvey@AmericanInvsco.net.

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