Many people procrastinate when it comes to saving and investing for retirement. Too many say, 'I'll start tomorrow. I can hardly make ends meet now.' The result is that by the time they get serious about generating retirement income, their money doesn't have enough time to grow. This chapter examines ways to accumulate money beyond the retirement income sources discussed in Chapter 3. If you are unfamiliar with some of the terminology used, please see the Glossary.

First Things First

Some people are very attracted to the idea of making money fast, even when there is no guarantee it will turn out that way. They invest money before they have done other basic things to build a financial foundation. If an investment doesn't work out as planned, they find themselves in serious financial trouble. You must build a solid financial foundation before you start saving and investing. Such a foundation consists of these eight building blocks or components:

1. Solvency: Solvency means having enough income to meet current expenses. Make sure you have a budget that allows you to do this before you think of investing, rather than thinking an investment you can't afford will make you solvent. If you have questions about developing a spending plan or would like help in balancing your budget, go to the website below which has a number of helpful resources.
2. www.extension.iastate.edu/financial/management.html

   BUILDING BLOCKS OF A SOLID FINANCIAL FOUNDATION Solvency An emergency reserve Access to credit The right amount and type of insurance protection Home ownership Savings and investments A retirement plan An estate plan

3. Emergency Reserve: You need to establish an emergency fund to pay for unexpected bills. Paying the emergency fund should be considered a standard monthly payment just like paying any other bill. An ideal emergency fund is two or three months' worth of take-home pay. This emergency reserve needs to be liquid, meaning you can access this cash quickly.
4. Access to Credit: Be sure you have access to credit. While accumulating too much debt is never a good idea, it is still important to be able to get credit when you need it, whether you are financing a car or replacing a furnace. Credit may be a personal loan from a bank or a credit card. You can develop a good credit history by paying credit card and all other bills on time and repaying any personal loans according to the terms of the loan contract. Developing a good credit history is essential for getting any additional credit you may need in the future such as a mortgage.

Planning Ahead for Retirement

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