You have probably noticed a major money paradigm shift that is happening. The old saying “this time is different” usually gets investors into trouble; we heard this phrase in anticipation of the internet changing the world, and hence used for validating exorbitant valuations in the stock market in the very late 1990’s, particularly the technology heavy NASDAQ. Others heard it relating to the tulip mania in 1637, and many other manias that have come and gone in between these two.
A paradigm is more of a larger pattern or model, however, than a mania that relates to a market. What is the money paradigm shift that is happening? Here are a few manifestations of it.
1. Individuals finding financial security by working for a company for their lifetime, or at least a large part of it, and then retiring on the money from their retirement fund accumulated at that company, is far from a given now; I’m sure you have noticed this shift if you are not in the midst of an upheaval in your life from it.
2. For baby boomers that lost a chunk of their retirement accounts in the financial crisis, earning even the historical long term rate of 10% annually from the stock market until retirement is not going to rebuild their wealth in the near future, or likely sustain them during their life due to inflation, higher health care costs, and longer life expectancies.
3. The standard 4% annual retirement account withdrawal advised by most financial advisors is not going to allow many “retirees” to live out their golden years in a golden or even silver lifestyle.
Over the past few years, I have learned the importance of being a glass half full girl instead of focusing on what is not working. Having said that, let’s look at a few of the positive outcomes of the new money paradigm:
- Many people are entering new fields entirely in their forties to late fifties; this may be out of need due to job loss, investment account deletion, or finally acting upon long ignored passions or callings. This can be a great thing that can provide significant income, potential tax benefits when properly structured, and even a happier life. (Isn’t a happier life what we all want?)
- There is a return to focusing on what really matters in life that is reflected in how one chooses to spend their money. My parents’ generation did this naturally as a result of the great depression; they are often referred to as the great generation. Focus and values are good things.
- Increased accountability happens as a result of losing dependence on someone else’s company to provide financial security. The old 8 to 5 job may pay the bills, but are you enjoying what you are doing with the majority of your days? What if you had to make a change?
While scary, a change in financial security forces us to say to ourselves “How can I make this work?” While the answers we hear if we are truly listening may be even scarier than the financial uncertainty itself, leaving our comfort zone always invites opportunities to grow and expand.
What are you being called to do for financial security? Is it to learn to invest better, to understand how to evaluate your financial advisor or to increase income so you can have financial freedom? Ask the question, listen carefully to the answer, and take the very first step today.