The Price of Procrastination

This week’s blog is inspired by our political leadership since I can’t seem to go anywhere without being reminded of the ticking clock in Washington. Once again, by putting off a decision until the last possible minute, its impact on all of us will be much greater than it should have been.

We all know that it’s easier to put off today what we can do tomorrow, but oftentimes we are simply taking a manageable situation and turning it into a crisis. If you look around, examples of this are not hard to find – and might even be happening in your own life.

A detrimental mistake I see people making at an early age occurs when they are just entering the workforce. The euphoria of earning (and spending) your first “real” paycheck may overshadow the importance of enrolling in the company 401(k). However, the combination of compound interest and time is a compelling reason to start saving early. If you start at age 25 and save just $20/ day and earn 6% interest, you will have amassed over $1.2 million at age 65. If you wait until you’re 35 and save $25/day, you will have $450,000 less to spend in your golden years.

As your career continues, retirement may seem a distant concern, so ensuring you are on track to get there is easy to put on the back burner. You need to take the time to make certain you are saving enough and your accounts are properly allocated at least annually. If you wait until you are ready to walk out the door before seeking financial advice the road to retirement may become even longer.

In retirement, if your spending is putting your financial solvency in jeopardy, many times making at least a small change can immediately make a large impact over time. The only thing you will accomplish if you ignore the situation is making it worse. Be honest when examining your needs versus your wants and wishes. It is a lot less painful to spend fewer dollars eating out, traveling or on gifts for your family than it is to get by on Social Security alone.

I often joke that when I am overwhelmed with the scope of a task, I like to “eat the elephant one bite at a time.” This is a good saying to keep in mind if it feels easier to put off or avoid making a financial decision. The ability to reach your goals may feel impossible at times, but procrastination may only ensure it is more difficult to achieve them. Just ask Congress.

Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/

Alice Came to the Fork in the Road

Alice came to the fork in the road.
“Which road do I take?” she asked.
“Where do you want to go?” responded the Cheshire cat.
“I don’t know,” Alice answered.
“Then,” said the cat, “it doesn’t matter.

I came across this quote from Alice in Wonderland last week as I was working on our company’s business plan. I think it does a great job of illustrating a problem we all have from time to time. When we try to make decisions about what to do next in our business, our personal or financial lives, we lose sight of how important our goals are in determining our next steps.

The past 24 months have emphasized how critical it is to have financial goals and a plan in place to reach them. People who set goals and monitor their progress against those goals have been much calmer and able to handle the day-to-day market volatility we’ve experienced.

People who are reluctant to set goals and establish plans are more battered by their emotions and vulnerable to the daily investment noise that encourages you to “Do something!” During the early part of this year the urge to bail out of stocks was strong. With the recovery we’ve experienced since March, some are now thinking they should be more aggressive while others are worried about another drop after the Dow Jones Industrial average reached 10,000. The answer is the market movements don’t matter. What is important is your own specific financial situation, you personal goals, and your plans to reach them.

There are tools available to help you establish goals if you don’t know where to begin. If you enjoy reading I recommend The Magic Lamp: Goal Setting for People Who Hate Setting Goals, by Keith Ellis; What are Your Goals: Powerful Questions to Discover What You Want Out of Life or Goal Setting 101: How to Set and Achieve a Goal, both by Gary Blair. At The Asset Advisory Group, we have tools available to help you set personal and financial goals as well, and can work with you to design a plan to meet them.

The happiest and most successful people I’ve met throughout my life have been people who have goals and work to achieve them. Goals give us direction and provide a positive focus when everything seems uncertain. If you aren’t setting goals for yourself, you are missing out on a great opportunity to lead a happier life.

By Jeannette Jones, CPA, CFP(r)
jjones@taaginc.com

www.taaginc.com

Make Your Own Declaration of Independence

You don’t have to be Jefferson to create your own Declaration of Independence. Writing your own can be a great way to recommit to yourself and your financial independence this summer. Make it your half-year resolution.

We have all thought about our goals and what we want our future to look like. If you're anything like me, it will help you to write it down. Each day we make financial decisions and take steps to get there. We go to work and earn another day's pay. We pay our mortgage and can check one more payment off the list.

Start your Declaration with a mission statement. What is your goal? Is it to have enough saved to be financially independent until the end of your life? If you’re having trouble defining your goal, answer the question “How do I look in fine, ten or more years?”

Try not to just pick a number for your goal, such as stating “I want to have $1,000,000 by retirement.” Instead, try to model as closely as you can how much you will need in dollars to fund your desired lifestyle (Note: This sort of modeling can be made much easier with the help of a financial planner). Knowing what you need to save in order to fund your goals is much easier than picking a number and working backwards.

Once you have defined your goals, take it a step further and outline what you will do to work toward that goal. You could have a blanket answer to the questions by saying that you will work to fund your goals, but you might find it more useful to be specific. An example might be “I will set aside $250/month in order to have enough saved in 5 years for the boat we want.”

After you progress through defining your goals, rank them in order of importance. You might find that once you have them listed in this order, you see that your list moves from ‘needs’ to ‘wants.’ You might be surprised to see which items fall to the bottom of your list.

Finally, sign and date your declaration. Don’t just file it away, either. Keep it somewhere that you will remember to re-evaluate it each year. Perhaps you stick it in your current year’s tax file? That way you will find it next year and remind yourself of what you’re trying to do.
-It’s much easier to get there when you know where you’re going.

By Amanda Bashore, CFP®