I often hear colorful comments and complaints about getting older that I can’t share here, but I have found an upside to aging that I appreciate.
If you surround yourself with people younger than you (vs. only your peers) and you really listen, you have an opportunity to hear new ideas you might otherwise miss. And when you combine those ideas with the knowledge you’ve accumulated from 60+ years of life experience, the sum is much greater than either part.
We recently had a visit with our son and his wife, and they were sharing some of the challenges their friends are facing with their jobs, finances, and just finding their way as adults and soon-to-be parents. One friend told them he was min/maxing himself to move ahead in his job – and I was struck by the idea of applying gaming strategy to real life. While I realize the concept isn’t profound, often the simplest ideas, when applied in the right way, can have a big impact.
Consider your personal finances. Sometimes we tend to focus an equal amount of time and effort on all aspects of our financial picture, which can lead to feeling overwhelmed by everything we feel we have to get right. And when you’re overwhelmed, it’s easy to give up.
What if you focused on minimizing your financial weaknesses and maximizing your financial strengths to be more effective instead?
For example, if you haven’t been able to save or follow a budget and you’ve been trying for a while, accept the fact that you’re probably not going to change, and build a work-around alternative. Sign up for the maximum employee deferral into your 401(K) plan, set up a direct deposit from each paycheck into a less accessible savings account to create the emergency savings you need, establish a 529 plan if you’re facing college expenses and have it auto-funded each month, then give yourself permission to spend the rest of your monthly cash flow without tracking expenses – guilt free.
What about your retirement savings? A 401(K) plan is the most important retirement resource for most people and its successful growth is critical for your financial independence, but after signing up many people ignore it. If you rarely look at your investment options in your plan or forget to rebalance your account, let TAAG help by reviewing your options and setting an asset allocation for both your existing balance and any new contributions. If it’s available, set your plan for auto-rebalancing so your allocation can stay on track without any additional effort from you. If that’s not an option, consider a target retirement fund, now available in many plans, to keep you on track. And make sure to maximize the employer contribution you can receive so you don’t walk away from free money.
As for maximizing your financial strengths, consider the environment we’re in today.
We spend most of our time talking about our personal financial capital – our investments and assets like our home. But our human capital – our skills, knowledge, and experience – is a major factor in our financial success and can have a huge impact on the trajectory of our financial security.
If you have a unique set of skills or talent and you’ve been in a holding pattern in your career advancement, consider testing the waters to see if it might be time for you to move to another opportunity where you can increase your compensation as well as your chances for future advancement. Regardless of what you decide, networking to learn more about what is going on in your field can always help you in the future.
Another way to maximize your financial strength is to optimize your debt and improve your FICO score in the process. Interest rates for home refinancing remain near record lows, even with recent increases. With home values rising across the U.S., the ratio of mortgage debt to home value has gone down significantly for many homeowners, leaving room for potential borrowing. If you have higher-interest private student loans (not Department of Education or federal loans as Sarah wrote about in her blog) higher interest rate credit card balances, or a first mortgage loan with a rate higher than 4% you should consider using the current low interest rates to pay off those debts by refinancing. If you have no other debt but your first mortgage, you can use current low rates to pay down your mortgage faster by refinancing and paying off the loan in a shorter time span.
Each of us has our own financial strengths and weaknesses based on our personalities and personal histories. Consider taking a step back from your situation and thinking about how you can minimize your financial weaknesses and maximize your financial strengths. Better still, let us help you find more ways to min/max your finances. We’re open to the conversation!