Financially Speaking
BEGIN WITH THE END IN MIND
Regardless of your age or what you are trying to accomplish, begin with the end in mind.
What motivates you? When you were younger and wanted to learn to play the guitar, you might have visualized playing guitar like Eric Clapton. This might have driven you to practice every day, seeking success. Perhaps you watched the tragic events of Sept. 11, 2001, and that inspired you to pursue a career as a doctor, nurse, or first responder. There is generally something in your life that helped shape who you are today.
Whatever your dreams are, always look to the most successful individuals you know and see what you can learn from them. Successful people will generally share what helped them achieve their success. They have a passion and follow it. Albert Schweitzer said, “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.”
There are many books on motivation and positive thinking that can help you achieve your lifelong ambition. Here are a few of my favorites that helped me along the way:
“The Magic of Thinking Big” by David J. Schwartz, Ph.D., which may help you stretch your mind by providing actionable insights.
“Think and Grow Rich” by Napoleon Hill, who states, “Whatever the mind can conceive and believe, it can achieve.”
“The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, which discusses living below your means and emphasizes that financial independence is more important than appearing wealthy.
Sit down annually and take stock of where you are today. Choose one day each year to assess what you have accomplished. I don’t recommend Jan. 1, since most New Year’s resolutions fail by the end of the month. Perhaps use your birthday as a benchmark and give yourself this great gift. Ask yourself, “Is this where I want to be?”
Looking backward, is there something you would have done differently? Do not just think about it – write it down. If you write it down, you may act on it. If you don’t, it may become just a fleeting thought. In 2023, Ron Shaich wrote the book “Know What Matters.” If you don’t know his name, he is the one who led Au Bon Pain while still in his 20s and started the fast-casual dining company Panera Bread. Now 71, he still completes the annual ritual of reflecting on where he is now and where he wants to be. He said, “What am I going to do now to ensure that when I reach that ultimate destination, I’ve done what I need to do?”
Here are a couple of things that may help get you on the right track toward your goal of being wealthy. If you struggle with paying your bills, have too much debt, or have a weakness for various subscription services you can do without, start there to get your cash flow on the right path.
If you have credit-card debt, it is extremely unlikely you can meet your goal. Most people today have no idea how much credit-card interest they are paying – often 20% or higher. Maybe all they are concerned about is paying the minimum amount just to maintain their credit score. Consolidate all your credit-card debt and refinance it with a personal loan or a home equity loan. Chances are, you will save well over 10% on your interest rate. With the money you save monthly, start prepaying additional principal payments until the loan is paid off.
Maybe you don’t even know what all of your expenses are. Take a good, hard look at what you spend. Review your bank and credit-card statements to see what you are paying monthly. Chances are, you have several automatic payments each month. You may be able to reduce or even eliminate some of these expenses. Eliminate any subscriptions that automatically renew annually and that you no longer use.
Today, there are so many services available that make life easier but may cost you a small fortune. Perhaps you use a food service company that delivers prepared meals, and all you have to do is heat and eat. Maybe it’s a company that delivers ingredients so all you have to do is cook. It may be time to go back to the grocery store and buy the ingredients you’ll need to make your own meals. This could provide considerable savings. Review your mobile phone carrier and see if you can choose a different plan or even change carriers, which could save you money. Review your cable and streaming services as well. Perhaps you could have your coffee at home and bring it with you, instead of making a daily Starbucks stop that adds up. Although these changes may offer small savings, they accumulate over time. Doing this type of expense review may sound like work, but you’ll feel fantastic once you complete it.
You have children and want the best for them, as we all do. Consider what the best educational path is for them. If you don’t have the money, does it really make sense to go into substantial debt for their college education? If your children will not qualify for scholarships and you are looking for affordable education options, consider the following: Attend your local community college for the first two years and then transfer to your state university for the next two years. Choose a state university over a private university. In New Jersey, yearly tuition and fees for Rutgers University are $17,764, while at Princeton University (if you can get in), tuition and fees are $65,498. In Pennsylvania, tuition and fees for West Chester University are $10,686, while at Villanova University, tuition and fees are $69,846. Consider sharing the educational expenses with your child. Find the right path for your family and don’t neglect your own retirement.
Spending less than you earn can help you achieve your goal of financial independence. This can be one of the first steps toward becoming wealthy. Focus with the end in mind: How much money will you need in retirement? I’ll dive into helping you find the right number in future articles.
If you have any questions, please feel free to contact me. Now that you’ve tightened up some expenses, head to the beach for a great walk – and don’t forget the sunscreen!
Fred Dunbar, CLU®, ChFC®, RFC®, AIF®, is the former President of Planning Directions, Inc., a registered investment adviser, and Common Cents Planning, Inc.. Securities are offered through Commonwealth Financial Network®, member FINRA/SIPC. Fred may be contacted at 800-647-0762, by e-mail at freddunbar@commoncentsplanning.com or by mail at 239 Baltimore Pike, Glen Mills, PA, 19342.
Advisory services offered through Planning Directions, Inc., a Registered Investment Adviser, are separate and unrelated to Commonwealth.
This commentary is meant for general informational purposes only and is not intended to be a substitute for professional financial, tax or legal advice. Investing involves risks including the potential loss of principal. Past performance is no guarantee of future results.
