Your investments: Leaving Egypt and financial freedom

Another common mistake is thinking it’s impossible to save while living in Israel, because according to “conventional wisdom,” it’s impossible to save on an Israeli salary.

By AARON KATSMAN
money (photo credit: REUTERS)
money
(photo credit: REUTERS)
“Now I’ve been free, I know what a dreadful condition slavery is. I have seen hundreds of escaped slaves, but I never saw one who was willing to go back and be a slave.” – Harriet Tubman
As I write this column from the quiet confines of my office, the rest of my family is working hard getting our apartment ready for Passover. The sacrifices I make for my readers! Passover is fast approaching, and after all the hard work is finished in preparation, we get to enjoy a full week of the holiday.
We celebrate the fact that we have gone from being slaves to being a free people. In the tractate of Pesachim 10:5, the Mishna states: “Man is obligated to view himself as if he himself left Egypt.” In other words, we must internalize that we were once slaves, but now we are free.
Although we are free in a spiritual sense, are we financially independent? Have you put off saving for the future? Do we still rely on our parents for help? Has overdraft become a way of life? If the answer to any of these questions is yes, then our eating of the “bread of affliction” may have more than one meaning.
Where to begin
There is a common perception that only people with a lot of money are able to make money. This is just flat out not true. If you want to achieve financial independence, then you need to start investing. By saying “financial independence,” I don’t mean getting rich.
Rather, I mean that you are self-sufficient, have retirement savings and don’t fret when your toilet breaks and you need come up with some money to pay a plumber to fix it.
Don’t think that $25,000 to $50,000 is not enough to start with. With that sum, you could start an investment account, you could make a down payment on a rental property – or potentially even do both. But if your mind-set is that you are destined to always have a small nest egg and always be reliant on someone else, you will never get anywhere.
As I have written many times, the majority of Americans between the ages of 20 to 35 have zero retirement savings. Do you think that it’s just because they are young and things will improve with age? Well, it’s even worse for older Americans, as half of them over 53 years old have no retirement savings.
It’s so important to start investing as soon as possible.
If 25-year-olds with $10,000 start adding an extra $320 a month at a 7% annual compound rate of return until they turn 65, they will wind up with $1 million.
Create a plan
Everyone needs to start somewhere. Your $50,000 isn’t going to double or triple magically. For this reason, it is important to create a financial plan and start understanding what your short- and long-term needs and goals are. A financial adviser can help you define them.
When creating a long-term plan with an adviser, it’s important to take future expenses into account. These include the purchase of a car within five years or possibly marrying off children in another eight, 10 or 12 years. Such relevant information is necessary for the adviser to provide an accurate picture of what should be done to meet these future expenses.
Start building wealth
Another common mistake is thinking it’s impossible to save while living in Israel, because according to “conventional wisdom,” it’s impossible to save on an Israeli salary. However, this is really not the case. If you make saving a priority, then you will be surprised at how much you really can save, even in Israel.
We all tend to make certain lifestyle choices that impact our financial situation. Whether it’s living in a certain community or choosing to take a particular vacation, our expenses are directly impacted by these decisions. But if we make financial independence an actual priority, we can make the lifestyle changes necessary to save a couple of thousand dollars a year.
Putting aside just a few thousand dollars each year may not seem like a way to grow your wealth. However, taken with your starting sum, investing a few thousand dollars every year for 10 to 15 years could potentially leave you with hundreds of thousand dollars.
Before you know it, you could be financially independent.
As we are all busy cleaning our homes of any remnant of chometz, take the time to get you finances in order as well.
Use this time as a new beginning, and get on the path to financial independence.
Chag sameach.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.
aaron@lighthousecapital.co.il
Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.