Head in the Sand? Are You Happy With Where You Are Financially?
You are where you are today because of the decisions you have made in your life.
We usually get what we deserve in life. When it comes to money, how you handle your monthly cash flow is the single most important factor in your financial success or failure. As a financial planner, my idea of “financial success” is best described as “financial peace of mind”. The best method to gain peace of mind is to create a financial plan that spells out specific goals and attaches investment accounts to future costs. Retirement or “financial independence” is the most universal goal and if you have not compared your desired retirement income with your sources of retirement income, you can’t possibly know where you stand.
I know that many readers have their head in the sand and do not want to be told that their situation is dire and they would rather not know than be told they have to significantly change their spending/saving habits.
The place to start your financial planning is a an analysis of your monthly cash flow. For Glen Ellyn and DuPage County residents, your financial success is not just a function of your family income. How much of your income you save is much more important. One of my favorite sayings is “you are where you are today because of the decisions you have made in your life”. Of course that includes, your education, your spouse, the number of children you have, etc.
For most readers, those choices are in the past as are many of their financial decisions. If you wonder why you do not have a larger nest egg or money for travel or college for your kids, look at your checkbook, or better yet your past credit card bills.
For years, we have been inundated with a growing number of businesses (and Gov’t via taxes) trying to get us to part (advertisements are everywhere) with our hard earned money. Many of my most financially successful clients are over 65 years old. They are from a different era than the Baby Boomers and the younger generations and I believe we could all financially benefit from following their example.
What we could learn from seniors citizens:
• We do not need to revamp our wardrobe every season.
• Going out to eat is a special event, not something we do multiple times per week. This alone could save many families thousands of dollars per year!
• Your cell phones, golf clubs, TV, computer, etc. don’t need to be replaced every time a new model comes out. Do we really need the IPhone 5
Say “NO” more often when your kids ask for things.
• Try shopping with a list, paying cash and leaving your credit cards in the car before going into a store or mall. If that doesn’t work for you shop without a cart.
• My personal favorite is to live on a weekly cash allowance for any purchase that will be rung up at a cash register. THIS IS THE SINGLE BEST METHOD OF CONTROLLING SPENDING THAT I HAVE EVER USED.
None of these ideas will be implemented unless you have a big enough “WHY”.
Why would you want to be put on an allowance or change any of your spending habits? One of our client’s in Elmhurst has three daughters they want to help pay for college beginning next year (The WHY). They implemented a monthly allowance plan and were able to sock away $700 per month in the 529 IL Bright Directions College Savings Plan. College savings for their daughters was a big enough WHY to get them to change their ways.
WHY would you save money in addition you your current 401k plan?
I recently ran an analysis for a client in Wheaton. The analysis indicated that in order to maintain a retirement income of $75,000 per year during retirement they would need a nest egg nearly $2,000,000. Their current plan left them quite a bit short (The WHY), so they decided to start having $1,000 per month automatically deducted from their bank account and deposited into a new tax managed portfolio.
Do you have a big enough WHY to motivate you to get your head out of the sand and start on a real plan to gain financial peace of mind?
If you do, there is never a better time than the present to get started by saving more of your take home pay. There are many calculators available online to help with this.
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