The first question I ask during a financial planning session is, “what are your short-term and long-term financial goals?” Instead of responding with concrete financial goals, the answers generally relate to a particular problem that they’re currently facing that’s preventing them from getting what they want. It has been said that the average person spends more time planning what they’re going to wear to work the next day then they do planning their financial future.
Most of us never take the time to identify specific financial goals and establish time frames to accomplish them. Nor do we devise a plan to make our goals a reality. We simply get the idea that we desire the latest gadget, latest fad, new home, new car, college education, etc., and impulsively pursue it. Only when we are thwarted in our pursuit or when it’s literally the last day to deal with serious financial decisions do we begin to seek professional advice. The information, advice, and ideas we seek are very specific. How do I get out of debt? What do I need to do in order to qualify for a mortgage, car, or student loan? How do I avoid bankruptcy or foreclosure? How do I get this account off my credit report? What is the best way to save for retirement? True financial planning is holistic.
When we address one financial subject without considering the impact on the entire financial picture, we’re left exposed to more and more financial breakdowns leaving us to wonder why the little man can’t get ahead.
By not identifying specific goals, prioritizing these goals and giving each goal a time frame many of us unknowingly have created competing goals.
These competing goals are tugging at our paycheck. A financial goal is a desire, want or need that has a price tag attached to it. When you spend money, you have in effect fulfilled a financial goal. You obtained something you desired, wanted or needed. Each purchase we make hinders our ability to fulfill another financial goal because our purchase reduced our money on hand. Money is finite. There’s only so much that will flow through our hands during our lifetime.
As long as God continues to give us breath we’ll go through various stages in life that will require major financial commitments. From starting a family to building a nest egg for retirement to leaving a legacy that will provide economic support to those who depend on us financially after our death. Unfortunately too many of us live in the moment. We’re only concern about what feels good right now. We’ll deal with life challenges as they present themselves.
Given that if you average $30,000 over a 35-year working career (age 30 to age 65) you’d make over $1-million dollars. I hold the belief that all can witness the true American dream which is to one day be debt free—including paying the mortgage off early. Being properly insured. Having a fully funded emergency fund, having additional cash saved to purchased big-ticket items, funding our children’s college fund, and building a respectable nest egg for retirement. The stark reality is however that:
70 percent of Americans are living paycheck to paycheck;
85 percent of Americans have a true net worth of less than $250;
62 percent of Americans say money is their biggest problem;
41 percent of American households do not have an emergency fund;
Money problems is the primary cause of fights between married couples;
51 percent of marriages end in divorce—of those divorces 80 percent site financial problems as the leading cause;
60 percent of College Students leave college with student loans and credit card debt;
Less then 2 percent of Americans own their home independent of a mortgage, and
96 percent of those 65 and older retire or die broke.
Why are so many people struggling financially in America? It’s because we ignore one or more of “The four P’s” to accomplishing your financial dreams—Priority, Patience, Planning, and Persistence.
Priority—Do you want a new car, a new house or to save for retirement? I often talk to people who say they can’t seem to save for retirement, yet they owned brand new cars their entire life. That tells me two things—new cars were more important than a retirement portfolio and if they did not have car payments for the past 20-years they’d have a nice retirement portfolio.
Patience—Patience is a financial virtue. As you began to prioritize you financial goals, you’ll learn that you cannot afford everything right now. Being able to delay purchases will help you avoid mountains of debt and interest charges.
Planning—“Nobody plains to fail, they just fail to plan” is an often quoted phrase in the financial industry. I advise that we heed the advice and plan since most of us have witness firsthand what the lack of planning has gotten us—NO WHERE!
Persistence—Aspiring to one day be debt free, properly insured, having a fully funding emergency fund, saving money to purchase big ticket-items, funding the children’s college fund and building a respectable retirement nest egg is not an easy road to travel.
Your peers are all following the 96 percent crowd who’ll retire or die broke. The temptation of wanting everything right now will never go away. In order to fulfill your dreams you have to persistently prioritize your goals, persistently plan and persistently be patient despite the challenges.
(Mortgage and Money Coach Damon Carr is the owner of ACE Financial. Damon can be reached at 412-856-1183.)