According to a recent study, 90% of Americans will spend more time planning for vacation than they spend planning for retirement. Similarly, we often observe firsthand how many do not truly know where their money is spent; and they do not devote time to gain more clarity about it. Life becomes a foggy trip without rich meaning.
No one purposely sets out to have an undefined financial life… it just happens to us as we become a part of the culture in which we live. It’s human nature which spans all of time; we repeat actions generation after generation. One of the wisest men to ever live, Solomon, offers sage points in the Bible’s Ecclesiastes which can be simplified to these thoughts:
- the more money we have, the more we want;
- the more we have, the more we spend;
- the more we have, the more we worry;
- the more we have, the more we lose;
- the more we have, the more we leave behind.
Without a sense of priorities for what we do with our financial resources, there is nothing to hold us accountable for the way we spend – unexamined priorities lead to unrestrained spending. The good news: all of Solomon’s points can be directly addressed by developing an honest picture of how you live and examining where resources actually flow compared against your priorities. When there are mismatches, there is opportunity for better alignment and creation of a budget that leaves you feeling more satisfied and confident about the future.
For example, some younger individuals often state that savings will need to wait for one reason or another. They may be saddled with student debt while seeing lower earnings than expected in a few years. But regardless of one’s situation, there is opportunity to develop thoughtful financial habits early that create flexibility for the future. The first habit is to put at least 10% of pay per year including any employer matching into a tax-advantaged retirement account. The second is to save an additional 5% or more in an “emergency” fund to serve as a buffer in the event of an unexpected expense or decline in income. Once that emergency fund balance covers 3 to 6 months of expenses, the 5% saving rate can be committed to a longer-term goal. If these two goals cannot be accomplished, one’s budget should be refined.
At the other end of the spectrum, some individuals with lots of income seem prone to losing track of where money is being spent. Then as a transition to retirement occurs, financial life can feel impossible, and even provoke significant anxiety about the prospects of living a dramatically different lifestyle.
As you enter a New Year in 2019, we advocate pursuing a resolution of “planning for a High Definition life”. Planning in “high definition” requires an honest assessment of what your financial life presently looks like, comparing it against priorities, and being specific about what you want for the future.
The difference between a dream and a goal is that dreams are only about the destination, not the journey. A goal requires systems, processes/planning, and structure to facilitate the desired end result. If you would like to start planning, or enhance your plans to be in “high definition”, we would enjoy introducing you to that process in 2019. It’s part of how we help you achieve financial peace of mind!