ST. CROIX INSIGHTS
Financial Security is Achievable
BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
We live in a society that says that in order to feel better you have to spend money. To many, our very possessions show a level of status. Every day, we are bombarded with ads selling us a “lifestyle” or widget we need to own to feel better about ourselves. The message is if we don’t purchase it now, we will not be fulfilled. Delayed gratification for most is unacceptable and for many it’s unheard of. We are judged constantly by the clothes we wear, cars we drive, neighbors we live near, where our kids go to school, and on and on and on. We all know that our financial well-being is not enhanced by the amount of our spending. So why do we continue to put this pressure on ourselves? We know better…don’t we?
Yet for some, they will continue to compare themselves financially or materially with those closest to them (the proverbial “keeping up with the Joneses”). It’s our hamster wheel of life and I’m here to tell you that they don’t care about your status and you shouldn’t care about what other people think. Life is too short. It’s time to hop off that wheel.
Face your Money Issues
Dealing with money is not easy for many people no matter your walk of life or background. You may view money as a tool, burden or pain in the rear. Many individuals I encounter would choose not to deal with it at all. To some, that would be the ideal world. Not having to deal with money and having all of our needs, wants and desires met. Wouldn’t that be cool?
But I’m sorry to tell you that that doesn’t exist, unless you know something I don’t? I’m going to go out on a really big limb and say that even Bill Gates and Warren Buffet have to deal with their own money. Sure they have lots of money (I suspect that much money creates its own unique problems), but I would guess that they still have problems outside of money, just like you and I. Yet two key financial philosophies they have solved for themselves are:
- How to earn money (and lots of it)
- How to develop a money strategy
Those two items sound easy, but they are not only challenging to implement – they have to match your core long-term values.
Yet the problem with money and living in the “United States of Money” (as I like to call it) is that we truly need cash for our basic needs.
That is something we can all agree on. Whether it is food, clothing, shelter, health care or transportation – everything requires money. We can’t avoid it, look the other way, or neglect it because if we do, it will come back and bite us. Our money decisions today can have long-term impacts that we may never recover from in our lifetimes. So let’s just avoid that, not avoid money…agreed?
Money can also be complicated and may see it as easier to avoid than to address. Some may value money because over the years it’s come so naturally to you (i.e. you earn a lot of it). You have never worried about earning more today, tomorrow or in the future. If you run into a money problem, you’ll figure it out. I’m here to tell you life’s unpredictable. Forrest Gump famously said, “Mama always said life was like a box of chocolates. You never know what you’re gonna get.” Planning the rest of your life and your retirement takes time, energy and resources. It can actually be rewarding and help clarify and live out your life’s goals and values. I know planning your next vacation truly sounds more enjoyable, but financial security over the long run is more rewarding.
When you were growing up, did you discuss money?
I suspect that question would receive mixed answers depending upon your background. Growing up, if you didn’t have money, there wasn’t much to talk about or discuss or it was a difficult discussion for your family. In my family, I had to start working at young age if I wanted anything. For others growing up they never had to worry about money, but we never discussed it. We all have a money story. What is yours?
In my business, I work with higher net worth and income individuals and business owners. They make a very good living and chances are they are not necessary living “check to check.” Yet consumption, and not saving as much as they are capable, is a challenge for many before they started working with me. Most thought they were saving enough to reach their financial security.
A False Sense of Financial Security
Do you have a false sense of financial security and not realize it? I see it every day and most individuals I meet with don’t realize it. Many times it takes multiple conversations and illustrations before the light bulb goes off. If you’ve been taught – and thought – of only one way for thinking about your relationship with money, it is time to update your understanding to reflect your true core values.
Living with a greater thoughtfulness around our lives, the impact we want to make in our lives, families and communities is important. If you don’t have financial security, a financial plan you follow and live, you won’t have financial peace. Today I wonder where most people find their greatest amount of financial advice? With the growth of “robo” advisors, Internet, Call Centers and Index Funds, I find it hard to believe that financial security and wealth accumulation boils down to a yearly rate of return. If it was really that simple I wouldn’t have a job.
Financial security is a common theme I hear from my clients.
It’s not always initially definable beyond I want $1 million or $5 million in an account. I’m from the camp that is more comprehensive than that. No matter your income, background or education, financial security is achievable. But you need to define it for you and your family. What does it mean to you beyond having a boatload of money?
Defining your Financial Goals
Here are some key items to help place definitions (parameters) around financial security:
- How much should you pay yourself FIRST each month?
- What type of home meets your basic needs?
- What is your basic transportation to and from work?
- If the stock market drops by 50% (which you know it can) can you emotionally and financially handle it?
- What other basic living expenses do you have each month?
- How much do you want to give/impact others with?
- How much financial risk do you want to transfer to someone else’s checkbook in the event a host of events happen in your life (if any)?
The key to minimize your financial stress and increase your financial security is not living beyond your means. That truly helps you reduce financial stress. Managing your day-to-day finances is just as important as saving for retirement or wealth accumulation. That’s how to achieve financial the freedom you desire. There is no secret sauce but rather an open recipe for everyone to use.
Saving for Financial Security
Having to make up for lack of savings, you feel like you to need to take great risk in your investment portfolio which is something I also hear on a regular basis. When we don’t have our financial house in order, we feel like we have to take on greater risks to make up for our previous decisions. And I’m here to tell you, you should be investing to decrease your stress not increase it!
Having financial security truly gives you the freedom to come and go. It’s that the American Dream? Pick and choose what you want to do, when you want to do it? One of the biggest lessons I’ve learned in life is that it doesn’t matter what you make financially. Let me repeat that. It doesn’t matter, what you EARN in life. It’s about what you keep. This goes hand-in-hand with financial security.
So if all your money goes into “stuff” it leaves little or no money for financial freedom or life experiences. I’d argue that you are missing out on so much to have the latest iPhone, biggest home or the newest automobile. Our world is so big but the impacts we can have with others and on others is huge.
Financial Giving with Thought
Generosity towards others is a feeling everyone knows. It is a sense of joy and pride knowing you are helping someone or spreading joy and most times even better than buying something for yourself. Have you ever had the offering plate go by on Sunday morning wishing you had money or didn’t think you had put enough in and felt guilty?
My wish for everyone is to achieve a level of financial security to live the life you desire, impact those around you and leave a legacy that you seek.
Here are three questions to ask yourself:
- How would you describe your values towards money?
- What are 4-5 hard decisions would you need to make today to achieve financial security?
- Do you believe you can do it on your own?
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Ask yourself- can my portfolio support my lifestyle in my retirement?