Categories
Wealth

How Jeff Bezos Made All His Best Decisions

“All of my best decisions in business and in life have been made with heart, intuition, guts — not [with] analysis.” — Jeff Bezos

“When you can make a decision with analysis, you should do so, but it turns out in life that your most important decisions are always made with instinct, intuition, taste, heart.” — Jeff Bezos

“There wasn’t a single financially savvy person who supported the decision to launch Amazon Prime. Zero. Every spreadsheet showed that it was going to be a disaster. So that had to just be made with gut.” — Jeff Bezos

More from Amazon CEO and founder Jeff Bezos participates in the Milestone Celebration Dinner at the Economic Club of Washington in Washington, D.C.:

Trust your gut. Subscribe to DumbWealth (free).

Categories
Wealth

How Much Should You be Saving?

How much should you be saving? Many people have no idea.

David Bach, author of The Automatic Millionaire, provides his recommendation:

Why does it rise with age? According to Bach, “typically the older you get the more you earn and spend. And if you lose your job it can take longer to find a job that replaces that income.”

I’ve witnessed this first hand. It frequently takes a senior executive 1-2 years(!) to find comparable employment. I can only imagine how devastating this can be to the ego, savings account and family dynamic. Since senior executives tend to be in their 40s or 50s, they probably have exhausted marriages, college-aged kids and massive responsibilities. There is no worse time to stop the regular paychecks.

This is where years of socking away money into an emergency fund helps. But how many people are doing this? The reality is quite bleak – 26% of Americans have no emergency savings at all. This means they’d be dipping into their retirement funds if an emergency occurs. Unfortunately, the median retirement account savings for Americans is only $5,000.

Unfortunately, these dollar amounts leave most people far behind target. JP Morgan provides a table (below) that illustrates how much people should have saved, given their age and salary. (I’ve also provided other retirement savings target tables below.)

Source: JP Morgan
how much money should i have saved by 25
Source: Fidelity
Source: T Rowe Price
Source: T Rowe Price

The problem I have with all of these tables is that they’re based off a multiple of your current salary. Not only that, but the multiple rises with income. This presumes that you plan to retire into a lifestyle that requires your full current salary.

Most people require about half their salary during retirement. In dollar terms, many retirees could live happily off $40-50k. For those of us who live frugally and plan to continue doing so during retirement, the actual dollar amount required at retirement might be much lower than the estimates provided by these tables.

If you’ve calculated your estimate and feel like you’re way behind, you’re not alone. According to GoBankingRates.com, almost 1/3 of people in the prime of their careers (aged 35-54) have ZERO retirement savings.

Source: GoBankingRates.com

Why are people so unprepared?

The average person is financially illiterate. In 2011, the Investor Education Fund conducted a survey and found that only 29% of respondents could pass a basic financial literacy test. If people don’t understand basic personal finance, they sure as hell aren’t taking the right steps to secure their financial future and prepare for emergencies.

The average person must become more invested in their financial future. I’m happy to see that the Ontario government is working towards mandatory financial education in high schools. More must be done. Unfortunately, by the time a student reaches high school many bad financial habits have already formed. Parents still have the ultimate responsibility teach their children values and behaviors that support financial freedom and flexibility.

As I alluded to earlier, the risk of ignorance is financial ruin, divorce and missed opportunities for your kids.

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Categories
Life Wealth

The Fisherman and the Businessman

Are you working for ‘someday’? Are you working to save for tomorrow? We all are. But why?

As humans we benefit from foresight, and we know that a better retirement usually requires time and effort today. But what if we’re all doing it wrong?

These aren’t my words. I don’t know where this story originated, but I think it’s important for all to know:

One day a fisherman was lying on a beautiful beach, with his fishing pole propped up in the sand and his solitary line cast out into the sparkling blue surf. He was enjoying the warmth of the afternoon sun and the prospect of catching a fish.

About that time, a businessman came walking down the beach, trying to relieve some of the stress of his workday. He noticed the fisherman sitting on the beach and decided to find out why this fisherman was fishing instead of working harder to make a living for himself and his family. “You aren’t going to catch many fish that way,” said the businessman to the fisherman.

“You should be working rather than lying on the beach!”

The fisherman looked up at the businessman, smiled and replied, “And what will my reward be?”

“Well, you can get bigger nets and catch more fish!” was the businessman’s answer.

“And then what will my reward be?” asked the fisherman, still smiling. The businessman replied, “You will make money and you’ll be able to buy a boat, which will then result in larger catches of fish!”

“And then what will my reward be?” asked the fisherman again.

The businessman was beginning to get a little irritated with the fisherman’s questions. “You can buy a bigger boat, and hire some people to work for you!” he said.

“And then what will my reward be?” repeated the fisherman.

The businessman was getting angry. “Don’t you understand? You can build up a fleet of fishing boats, sail all over the world, and let all your employees catch fish for you!”

Once again the fisherman asked, “And then what will my reward be?”

The businessman was red with rage and shouted at the fisherman, “Don’t you understand that you can become so rich that you will never have to work for your living again! You can spend all the rest of your days sitting on this beach, looking at the sunset. You won’t have a care in the world!”

The fisherman, still smiling, looked up and said, “And what do you think I’m doing right now?”