The song Once in a Lifetime sums up the way I believe many people feel when they get to a certain point in their lives. Time has passed, they made decisions – or avoided making them – and they find themselves living a life they aren’t so sure about. Or as Talking Heads frontman David Byrnes sings, “And you may ask yourself, “Well… how did I get here?!”
The same question applies to our finances. People of all ages come to TAAG to improve their financial situations. Most are professionals, business owners, and others who are doing well, but feel they could be doing better. And quite a few say they’re disappointed with where they are versus where they thought they’d be – which is sometimes the reason they finally contact us. After more than a few years of observation, I’ve discovered some common themes these people share (with a nod to the Talking Heads for their relevant lyrics) as well as some strategies that have worked for them:
Letting the days go by…
We all carry around a list inside our heads of things we intend to do. Procrastination on tasks like household repairs may nag at you, but ignoring your retirement plan savings might mean the difference between being able to retire early or being stuck in a job that’s draining the joy out of your days. You can’t recapture all the years of deposits you would have made or the compounded returns you would have earned, but you can start making it better now. If you only do a few things for your ‘future self,’ make sure you,
- Sign up for your company retirement plan as soon as you’re eligible and contribute enough to maximize your employer’s matching – it’s free money you’re throwing away if you’re not signed up. If you’re already maxing out your plan, save additional funds in a taxable account. You’ll thank yourself later.
- Invest your savings in options that allow you to maximize your returns over the long term vs. saving into something ultra-safe like the money market or guaranteed fund. Realistically, retirement plan deposits should be money you access last, so those should be invested in higher risk assets like stock mutual funds.
- Use investment options that have the lower costs vs. those that posted the highest returns last year. Expenses are guaranteed but past performance isn’t.
Same as it ever was, same as it ever was…
As the saying goes, the definition of insanity is doing the same thing over and over and expecting different results. Many high-income earners find their salary and bonuses go up each year, but they have little to show for it in net worth. If you repeatedly feel that money is tight before your next paycheck, you need to change something. You may find ways to justify coming up short occasionally, but if it happens more than twice you need to get to the ‘why’ behind the ‘what.’
- YNAB, or You Need A Budget, has been a successful solution that we’ve brought up more than once in TAAG blogs. It’s because it works, and we have clients who have used it with success. Most budgeting software helps you track your expenses, but this one helps you get one month ahead of your bills, and create an emergency reserve, so you don’t tap into your home equity line of credit or borrow from your 401(k) the next time there’s an emergency.
And you may say to yourself, “My God! What have I done?”
From time to time I’ve met with couples who seem to have awakened from a dream – when they suddenly realized they were not in a good place financially and they had to do something quick. Sometimes this awareness creates a sense of resignation, a ‘why bother’ attitude that’s probably familiar to dieters and folks who have fallen off the exercise wagon.
You can’t do anything about the past, but making a change now can alter the future. It might not be as great as the future you could have had if you’d been saving since you were 22 or eating healthy your entire life, but it’s a heck of a lot better than the alternate trajectory.
It’s never too late to improve your situation, and it’s never too late to start. Making a few positive changes on your own or getting help from TAAG is a great starting point. It beats letting the days go by and then wondering, “Well, how did I get here?!”