Failing to prepare is preparing to fail. Ben Franklin’s words still ring true over 200 years after he wrote them. It is estimated that only 4 percent of all the people in U.S. or Canada can retire at age 65 with the same standard of living that they had before retirement. Thus, 96 percent of us would either have to reduce our standard of living, live on some form of charity, or continue working until they drop. The point is, “How would you like to be in the top 4 percent, pretty much guaranteed!” Here are some concrete suggestions:

Have a reserve for emergencies. Most of us worry about our return on investment or savings, yet forget the most important first step to financial fitness: having a reserve for emergencies. If you were to lose your job, get disabled for months, or incur a huge unexpected expense such as having to replace a roof, do you have enough liquid funds for these types of emergencies? I bet most of us would not. It is critical to first set up a risk-free account for emergencies and large unanticipated expenses. Normally I recommend as much as one-year’s worth of living expenses plus an additional $10,000 to $20,000 for large unanticipated expenses. Studies have shown that it will take the average person a year to find a new job (in case of job loss) or even longer to build up a business that has gone under. Having a risk-free safety net can make a huge difference to your financial stability, not to mention your peace of mind.

Get out of all debt. As Ogden Nash noted, “Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” Being debt-free at retirement is a major goal everyone should set for themselves. Yes, it is doable. You just have to know how to achieve it. There are six steps, as noted in my book Achieve Financial FreedomBig Time.

  1. Set up both long-term and short-term written goals. This is crucial. It will be your motivation when things get tough.
  2. Prioritize your goals. The key is to understand that you can have anything you want. You just can’t have everything you want. If saving up for your kid’s education is important, it might be necessary to cut back on those lattes or on eating out.
  3. Track your expenses for at least three months. You can’t control what you don’t know about. Tracking expenses will shock you as to what you are really spending money on and enable you to see where you can cut spending.
  4. Make some spending cuts with a figurative butcher knife. To meet your goals, this might involve cutting out the gym membership, spending less on clothes and shoes, or brown-bagging it to work. I have devoted several pages to how to accomplish this in my book.
  5. Create a matrix of your debts. The matrix should show for each debt, the creditor, the amount of the debt, the interest rate, and the minimum monthly payment and duration of the debt if you keep paying the minimum payment. Prioritize your debts by the amount of debt with the lowest amount coming first.
  6. Start paying off the lowest amount of debt first. This will result in quickly eliminating some debts and freeing up money to pay off more debts later on. Add the amount of the payment on your expired debt to your next smallest debt.

Using these simple strategies will enable you to get out of all debts, including mortgage debts, in less than twenty years!

Get your tax bill down to the legal minimum. One of the biggest perks of building a network marketing business is the tremendous tax write-offs available to small business owners (versus employees). Would you rather pay 30 to 40 percent of everything you make, or 15 to 25 percent? Taxes are the number one expense in North America. It exceeds what most people pay for food, clothing, housing, and transportation—combined! If we can lower our taxes by several thousands of dollars a year, would that help cure those retirement woes? I can’t emphasize this enough. So, how do you accomplish this? Read up on tax planning, such as what I write about in my books. Get a good tax tracker, such as Taxbot, that will bullet proof you from even the smartest tax auditor. I promise that if you run your business like a business, you will get paid handsomely.

Set up a retirement plan now. The earlier you start funding your retirement, the better it will be and the earlier you can retire. Many young people forget about this to their detriments. Even saving as little as $5,500 a year (which is the IRA limitation) can be worth over a million dollars when comes time to retire.

Avoid Scams. There are lots of people who want to part you from your money. Scams are proliferating faster than any other form of endeavor. If something sounds too good to be true, it probably is. Don’t let greed send your hard work and life savings down the drain, and don’t ever use retirement money to fund some crazy scheme.

Protect your assets. Law suits are proliferating. It is estimated that a new law suit is filed every 4 seconds in the U.S. Moreover, unexpected things happen such as premature death, disability, accidents, or sickness. The best way to handle all this is with insurance. You can get liability insurance for car accidents and business dealings including a liability umbrella policy of at least $3,000,000. Disability and life insurance are a must to cover these situations.

Remember the time-honored Boy Scouts motto: Be prepared!

SANDY BOTKIN, CPA, Attorney, is the author of Lower Your Taxes—Big Time and Achieve Financial Freedom—Big Time. He is also the developer of the top-rated expense and mileage tracking application Taxbot.

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