“I know I should be doing something, but I don’t know where to start.”
“We often set financial dates, but we end up putting it off.”
“I feel like I’m treading water. I’m expending energy but not getting anywhere.”
“I should have more to show for the amount of money that I make.”
Do these sound familiar? Many clients and prospects have expressed these types of worries to me. The more people that I talk with, the more I’m reminded of a huge problem: people don’t plan for their financial future, despite knowing that they need to.
This issue really intrigues me on a personal and professional level.
I’m a planner by nature, whether finances, health, or anything else that I can track and put in a spreadsheet. I get super anxious, if I feel unorganized and can’t quickly find information or data that I’m looking for. I learn so much digging into the mindset of someone who doesn’t have that organizational anxiety, which allows me to look at my nervousness in a different light.
On a professional level, if I can figure out how to solve the motivation problem, I can help people take action. In addition, it will be easier to help them get to where they want to be. That’s a win-win for everyone involved.
Since I’ve been thinking of this issue a lot lately, I wanted to explore it with you today. Hopefully the discussion can help you face some of your fears and give you the push that you need to move forward.
You Are Not Alone
Fear of isolation is a very powerful thing. As someone who has always felt like an outsider, I know how these feelings often lead to avoidance and inaction. So the first thing that I want you to know is that you’re not alone.
According to a 2015 Northwestern Mutual study, only 40 percent of those surveyed have set any goals for their financial future, while 30% have not prepared at all for living to 75. Not. At. All. Also, 37% of Gen Xers don’t “at all feel financially secure.”
Another study from George Washington’s Global Financial Literacy Excellence Center and PriceWaterhouseCoopers points out that only 24 percent of millennials have “basic financial knowledge” and just 27% are getting professional help. That means almost three quarters of millennials make impactful financial decisions like paying student loans, buying a house and investing for their future without any substantive financial basis.
I don’t give you these numbers to scare you (although they should). I just want to show you that you are among the majority of people, if you aren’t taking steps to secure your financial future. However, being one of many in this circumstance isn’t a good thing.
What Delay Is Costing You
My guess is if you’re reading this, you already have a sense that the lack of planning is a problem. But I’m willing to play Devil’s advocate for a minute and ponder, “why does it matter if I plan?”
Well, first it’s costing you money. A lot of it. In JP Morgan’s 2016 Guide to Retirement, they provide a chart comparing the account growth of $10,000 saved annually between four different people who retire at 65:
- Chloe invests from 25 to 65 ($400,000 total) and earns a 6.5%. She ends up with $1,870,840.
- Quincy invests from ages 25 to 35 ($100,000 total), earning 6.5%. He ends up with $950,588.
- Lyla invests from 35 to 65 ($300,000 total), at the same 6.5% earnings rate, and ends up with $919,892.
- Noah saves from 25 to 65 in cash ($400,000 total) earning 2.25% ends up with $652,214.
Chloe has over $1.2 million more than Noah, despite saving the same amount of money. Quincy invests the least and still has more money just by staring earlier than Lyla and Noah who invested 3 or 4 times as much as he did. Even if you’re not investing $10,000 a year, continuing to delay proper planning can still end up costing you hundred of thousands of dollars.
And it’s not just investing. When I show my clients their last six-months of spending based on their credit card and bank transactions, many are shocked that they spend so much on things that they don’t even value. I’ve also seen how not having the proper insurance can derail even the best financial plan or how dying without an estate plan can leave a family in lurch.
Lastly, it’s probably just stressing you out, especially if you are trying to plan with someone else. The anxiety, arguments and frustration costs you your mental energy and time that you could spend enjoying your life, rather than worrying about your money.
Simply put, not planning costs you tangibly in real dollars and intangibly in your time, energy and sanity.
What Can You Do?
This inaction scares me, and I don’t want to see people, especially people that I love, continue to make these mistakes. I’ve been blogging for three years in hopes of providing practical solutions to get your financial house in order. In my practice, I’ve seen how proper comprehensive planning has helped people achieve things they never thought possible and find much-desired solace in having a plan of action.
- Talk About Money – We live in a culture where people find it harder to talk about their finances than to talk about their sex life. Yet we can learn so much from each other by just being open with our friends and family about our financial lives and struggles. You’ll likely find that you have common problems. As such, together you can find helpful solutions.
- Start Now – I’ve seen how regret and guilt can cause people to shut down about their money. Yes, you’ve made some money mistakes. You should have started sooner. You’re embarrassed that you’re not further along than you should be. I get that. They are valid concerns. But wherever you are, there’s hope. Start now. Move forward from this point and use those past emotions as incentive to do what you can to never feel them again.
- Know Why You Plan – I can’t say enough how knowing why you are planning helps change your mindset about your money decisions. Take time to consider your values and goals around money and use that as the foundation for learning the next steps that you need to take to get to where you want to be.
I hope that this discussion helps motivate you to take action now. I would love to hear about what you think is holding you back. Email me at Brian@btfinancial.com or message me on Facebook or Twitter. Happy planning!