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We Must Live Within Our Harvest

There was a charming saying on an old church sign near my house that read, “Live within your harvest!” I agree with the intent, but I need to add to it. We must not just live within our income (budget), but actually below our income, so our budget allows us to save for emergencies and retirement.

Not only are many Americans not properly preparing for retirement, but they are also mismanaging the money they are presently living on. I believe this is because a lot of Americans are addicted to a lifestyle beyond their income. According to www.creditcards.com, in August of 2014 Americans owed $880 billion on revolving loans, compared to $285.5 billion in 1994.4 During those same twenty years, the credit card debt in the average household grew from $4,301 to $8,220. 5

Many Americans are drowning in debt. Sadly, credit cards, unpaid bills, bankruptcy and stress over financial mismanagement affect people financially and emotionally.6 Good stewardship begins with keeping our debt under control.

Before anyone can begin planning for a successful retirement, they must first understand that debt is the greatest hindrance to retirement. Debt is like the big parachute that slows down a dragster; except, in this case, it is slowing down our retirement savings.

America is enslaved to debt. In December of 2014, the United States’ total public debt was $18 trillion. This amount breaks down to $56,380 for every American adult. 7 At the end of 2009, Americans owned an average of 3.7 credit cards. That’s 391 million credit cards in use.8 One-third of credit cardholders only pay the minimum payment.9 Sadly, Americans averaged $15,799 in revolving debt at the end of 2011, which was five times the average amount in 1990.10 The reason why the American people cannot make better progress on their revolving debt balances is because the average annual percentage rate on a credit card that carries a balance is 13.18 percent.11 The credit card companies can charge these excessive rates because the debt is unsecured. Americans are enslaved to debt and one of the primary reasons is their continual use of high interest credit cards.

The reality of the American financial mess deepens. Unbelievably, more Americans filed for bankruptcy than graduated from college in 2008.12 But there is no time when debt is any more dangerous than when a person nears the end of his or her working years. According to the latest census, from 2001 to 2011, the largest increase in debt was with 55- to 64-year-olds, whose debt grew 64 percent. People 65 and older saw their debt more than double to an average of $26,000 in this age group. Even worse, 44 percent of all Americans 65 and older still have unpaid debt.13 Debt has a stranglehold on our families and it’s not letting go. One of the first steps toward being prepared for retirement is getting rid of your debt.

As an advisor with Prime Capital Investment Advisors, Dr. Richard Baker specializes in retirement plan design and implementation, including comprehensive fiduciary services. He helps businesses evaluate group retirement plan options and develop strategic plans to meet their participants’ retirement goals. His goal is to provide retirement plan solutions so employees can retire on time and with dignity.

The preceding commentaries are (1) the opinions of Richard Baker and not necessarily the opinions of PCIA, (2) are for informational purposes only, and (3) should not be construed or acted upon as individualized investment advice. Investing involves risk.

Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”) and Prime Capital Wealth Management (“PCWM”).

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