Financially Speaking: Stop to Start, Then Keep Going
Being persistent might help you be on your way to enjoying Endless Summers in the future.
A few comments we hear during an initial consultation are “I should have started saving earlier,” “It is just so hard to save today,” and “I just can’t seem to save enough.” Which one of these comments sounds like something you’d say? Or does it sound like someone you know? Whether you think you can or you think you can’t, you are right. The brain is a powerful influential force behind your actions. Take the time to sit down, and think about where you are today and where you want to be in 10 years, 20 years, or at retirement, then create a budget and stick to it. I’m not writing this just for the millennials today, but for everyone who struggles to save money.
I get it, life is hard. There are many who can only save if there is any money left at the end of the month. If so, they put it into a savings account. Do you find yourself at the end of most months with no money to spare? Unfortunately, when there is no money left at month end, many continue to purchase things but now it is on the credit card. The thought process is that you only have to pay a few dollars a month, but since credit-card interest rates are at 18% or higher, and you’re paying the minimum payment each month, you’ll never pay off those purchases.
You have to make adjustments in your spending habits to realize your dreams and goals. Let me throw out a dirty word for you to consider: budget. Merriam-Webster defines budget as “to put or allow for a statement or plan coordinating resources and expenditures.” It might sound fancy, but it’s nothing more than spending less than you earn. If you can do that one simple thing – spending less than you earn – you might be able to meet all of your goals.
A budget is one of the first steps to establishing financial stability and independence. When establishing a budget, write down everything you spend each month. Go through your checkbook, bank account, and credit-card statements. You need to stop and make time to do this. Be thorough and honest. Write down every penny that you spent last month. If you take multiple withdrawals from an ATM or use your debit card for purchases, include these as miscellaneous expenses. I want you to try something really radical: Go to your bank once a week and withdraw cash for things you would normally purchase with your debit card. If you do this, chances are you will spend less.
When writing down your expenses, be sure to note all of your needs (not wants). These include shelter, food, clothing, transportation, and health care, to name a few. It’s amazing how many people with no savings have new, expensive, leased vehicles. We have seen couples with combined monthly lease payments upwards of $1,400 or more. One of my favorites was a gentleman who came to see us because he was retiring. He pulled into our parking lot driving a high-end Mercedes SUV, which he leased for 5 years to keep his payments at $850 per month. When we sat down to discuss retirement planning, he handed me his investment statements which totaled $115,000. I asked him for all of his investments and bank statements. He looked me in the eye and said that’s it. Here is a man paying more than $10,000 per year for transportation and has basically nothing at age 68. By leasing vehicles, you will always have car payments. You might be better off buying a certified used vehicle. This way, you own your cars outright and keep them for a couple of years after they are paid off. How refreshing would it be to not have a car payment?
Today, there are so many new gadgets that you may feel you must have. We call these wants. You might prefer to eat dinner out a couple of nights a week, but frankly you can’t afford it. Stop. Your phone is only 2 years old, but you want the new and improved model. Stop. Hold off buying a new phone until your current one no longer works – what a novelty. Bring your lunch to work and buy a thermos for your morning coffee. This could easily save you upwards of $50 or $60 per week.
You have to rewire the way you think in order to achieve your goals. It takes persistence to accomplish many things in life. Calvin Coolidge was president from August 1923 to March 1929. He was known as Silent Cal, a no-nonsense man, a man of few words. He said, “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.”
Setting up a budget and sticking to it might be the thing that starts you on the road to success. Once you trim down your expenses, there should be a few additional dollars that you can invest. Take advantage of your company retirement plan, if they offer one, even if the company does not offer an employer match. Most think of contributing a percentage of their pay, but it’s much easier to just say I want to contribute $20 a week. It doesn’t seem like much (maybe one lunch and two coffees that you’d give up), but in reality, you will not miss the $20 since this comes out of your paycheck on a pretax basis. If you just stop going out to dinner or bring your lunch and coffee with you, you can easily save $20 to $60 per week. The first couple of pay periods might feel difficult, but you have to simply stick with it and be persistent. If you do this one simple thing, you will be on the road to meeting your goals.
As I write this article, the Eagles’ training camp has just opened. Think back to 1976 when Vince Papale became everyone’s hero, the overachiever who made the team. In 2006, they made his story into the movie, “Invincible,” in which the role of Papale was played by Mark Wahlberg. This was a great lesson in persistence.
You, too, can be persistent by simply setting a budget, sticking to it, and then watch the magic happen as you start to save toward your goals.
Now that you, your kids, or your grandkids have finally put together a budget, relax and grab your favorite chair, book, and beverage and head to the beach. You are on your way to enjoying Endless Summers.
Fred Dunbar, CLU®, ChFC®, RFC®, AIF®, is President of Planning Directions, Inc., a registered investment adviser, and Common Cents Planning, Inc. He also offers securities through Commonwealth Financial Network, member FINRA/SIPC. Advisory services offered through Planning Directions, and fixed insurance products and services offered by Common Cents Planning, are separate and unrelated to Commonwealth. Fred may be contacted at 800-647-0762, by e-mail at fdunbar@commoncentsplanning.com or by mail at 239 Baltimore Pike, Glen Mills, PA, 19342. He’s always happy to meet with you “down the shore” at 6606 Central Avenue N. Sea Isle City, NJ. 08243.
