The Head and the Heart
There are many high income earning individuals who come into our office, but many have not been successful in creating wealth. High paychecks come and high paychecks go, often in the pursuit of keeping up with the Joneses, whoever they are. It is really unfortunate. If you listen carefully to ads on the radio, the sponsor will be sure to tell you how much you deserve that trip, spa treatment or whatever item they are selling. The safety net for a secure future is being traded for a bigger house, fancier car, designer shoes…you get the idea. For many families this issue is compounded when they have children. They simply do not want to have to say the nasty word “no”. We all want the very best for our children, our family and frankly, for ourselves. It seems that there is always something that needs our time, money and attention.
Often, life gets in the way of prioritizing and making important decisions about such items, as nest eggs for college or retirement. So, how does a person with a hectic schedule and multiple demands make simple changes that can secure a financial future?
First, build up an emergency fund with 2 to 3 months of fixed living expenses. This should be in a bank account. Should you have an emergency, it is a priority to pay yourself back. This fund will keep you from turning to credit cards, and paying the accompanying high interest rates, in the event of a layoff or the air conditioner dying.
Second, everyone should be putting at least 15% of their income aside for retirement. Depending on your goals, you may need to put aside more. Maximize the corporate savings account if you have one, and then deposit into a well-allocated and diversified investment account.
Lastly, prepare in advance for the “big things”. Big things are college, weddings, cars, lifetime trip experiences. It is much less stressful if you prepare along the way.
While it sounds so simple, these steps will create havoc between the head and the heart. You know what you need to do, but you also know what you want to do. It is like looking at your favorite dessert while you are on a diet. Remember, waiting is not a plan! The longer you wait, the tougher it will be to have the nest egg you will one day desire.