We live in a consumption-oriented society, and most of us are subconsciously conditioned to spend rather than save a portion of our hard earned money. The ‘keeping up with the Jones’ mentality is one reason for this. Another is that we find it difficult to wait, or we are so busy that we don’t take the time to develop a plan for the way that we will handle our money.
Like me, I am sure that you have seen statistics such as the results of a 2018 survey from Bankrate (numbers match what Debt.com previously reported), which revealed the following:
• Only 39% of Americans would have enough savings to cover a $1,000 emergency
• 44% couldn’t cover a $400 out-of-pocket emergency
Money and spending become relevant when you have clear life goals. Goals should be related to a life purpose or vision that you develop after going through the process of creating a strategic life plan. Maintaining a long-term perspective is critically important to saving for goals, i.e. starting a business, retirement, or education. An important goal could also be taking a well-deserved sabbatical or the like. The vision or reason should be so compelling that you become internally motivated to delay gratification and exercise discipline. Think long-term rather than short-term; use a telescope rather than a microscope.
When it comes to financial goals, it may be helpful to focus on the following:
• Determine your financial goals and the cost or price for each goal
• Decide whether the goal aligns with your personal mission
• Consider the benefits from achieving each goal and losses to be avoided
• Calculate the amount of money that you need to save on a consistent basis
• Establish a realistic deadline for achieving each goal
As you save, focus on the following
• Start early – start now
• Build an appropriate emergency fund
• Diversify your investments across asset classes
• Exercise patience as you save and invest
• Stay the course once on track. If you veer off, realign rigorously and get back on the right path
• Read continuously to learn and increase your knowledge in the area of personal finance
Each of us has the opportunity to avoid being included among those in the statistics sited earlier from Bankrate. Regardless of what we earn or have, we each have a choice of how we will spend our hard earned money. Will you choose to spend indiscriminately without a plan or will you be more intentional and choose to save a portion of your earnings for meaningful, long-term financial goals? My hope is that you will join others and me in focusing on turning the tide in our country regarding spending and debt. If you need assistance or would like to have a conversation, reach out to us at Kelly Financial Planning. It would be a pleasure to get acquainted with you.
“Do not save what is left after spending, but spend what is left after saving.”
– Warren Buffett