3440: The Best Approach to Long-Term Savings: Building Your Nest Egg by Philip Taylor of PT Money on Smart Saving Habits

This is Optimal Finance Daily, the best approach to long term savings, building your nest egg, by Philip Taylor of ptmoney.com. Let's say you've got your retirement savings figured out, meaning you're currently automatically saving money each month through a four zero one ks, pension, or IRA at a level that shows you'll reach a comfortable amount of income producing savings by the time you retire. Let's also say that you do a good job of saving for annual Christmas gifts, a vacation or two, and a new car every five years. In other words, you don't rely on credit cards to afford the occasional splurge. Finally, let's assume you have college savings headed in the right direction as well as adequate insurance coverage. Now you want to take your finances to a whole new level. Maybe you want to retire early. Maybe you have an enjoyable career or business and you simply wanna start saving up some money to be used on a yet to be determined long term expense. Twenty or thirty years from now, this money could be used to give to your kids to be used however, for example, a wedding or a house down payment, take the trip of a lifetime, buy a vacation home, buy farmland and livestock, go back to school, buy a boat or expensive car, make a lump sum charitable donation, start a business, send your kids to a private university, or whatever else you just happen to want or need. Where do you put money that has no real specific purpose yet other than being deemed long term? Before we get started, let me say I think it's wise to have a specific savings goal for all of your money. Saving for the sake of saving is a sign that you might need to stop and think about what you want for your future. Dream a little. Okay. Back to the question at hand. Let's analyze this by looking at a few of the major factors, liquidity, return, and risk tolerance. How liquid does this money need to be? Can you lock it up in an investment with penalties for early withdrawal? When it's time to use the money, how long will you be able to wait to access your money? Liquid assets include things like cash and savings, except certain CDs, stocks, commodities, and government bonds. Illiquid assets include things like real estate, nongovernment bonds, antiques, and business equity. Knowing this money won't be used for a long time means you can probably sacrifice some liquidity, but not quite at the level of your retirement savings. You don't want to have to wait until retirement to use it because it's in a four zero one ks, for example. What kind of return do you want? Are you expecting this money to remain at or above the level of inflation? Are you looking for huge returns through the power of compound interest and earnings over the long term? High return …