Let’s face it: for too many people, the whole subject of finances, investment, and retirement is flat-out overwhelming…
Often, their personal finances are out of control. Too much month at the end of the money. At the very least, there’s room for improvement.
And investment? They’re convinced they just don’t have enough cash. (And in many cases, they’re absolutely correct.) And even if they did have “enough cash” to invest, what would they invest in? How do you know where to look?
Isn’t investment for super-savvy rich people with an inside track into the mysteries of the investment world?
So it’s not surprising why “retirement” can seem like a pipe dream…
“Do you have any idea how hard we’re working? And we’re barely getting by! How on earth is it even possible for any normal person to ever retire? As soon as we stop working, we’re doomed.”
So people often just decide to not even think about retirement. But that’s not such a good strategy.
It’s a Real Problem…
What’s going on here?
Well, everybody’s situation is unique ‒ but in general, the underlying issues tend to look something like this…
First, too many folks put their lifestyle first, ahead of their financial well-being.
In other words, instead of clarifying what kind of lifestyle they want and need, and then figuring out how to build an income system that will support that lifestyle on an ongoing basis, and into retirement… they just start spending the money they have now, on things that pretty much make them happy now.
That leads to the next problem: all of this spending on stuff in the here and now increases their financial liabilities.
They’re stuck with rapidly depreciating cars they can barely afford (cars are major liabilities, financially speaking). They live in a house, also a financial liability, that’s too large and way beyond their budget (if they even have an official, written budget).
They purchase and finance (via consumer debt) all manner of stuff that costs money to buy and then maintain, without giving any financial return.
The result? As their liabilities soar, their financial assets dwindle…
Their “savings” goes to car repairs (they didn’t have a separate fund set aside for this and didn’t figure maintenace as part of the cost of owning a car ‒ they only thought about their monthly payment) and other emergencies. Or food and bills.
Pretty soon, they have no savings.
In fact, it’s not too long before they realize that the only assets they have is cash in the bank. And by the time they pay the bills, there’s none left. They’re just waiting for the next paycheck to be deposited.
All of which means they have no protection against loss of income. Just one or two missed paychecks can sink the whole ship.
You can adjust the details here and there, and make allowances for different situations… but this kind of cycle pretty well captures the reality of most people’s day-to-day financial lives.
So when the subject of retirement comes up… well, it’s not exactly a comforting thought.
… With a Real Solution
You probably noticed that the real problem that started all this was… not having a plan for your financial well-being.
Maybe there was “sorta plan”: get a job and start making money… then we’ll figure it all out. But, as we saw, that only gets you so far.
Here’s a great quote from NFL great Fran Tarkenton: “An idiot with a plan will always beat a genius with no plan.”
In other words, this money and retirement thing isn’t about massive raw intelligence, having some college degree in “investing” or “finance,” or being born as an insider. It’s about having an effective plan.
And here’s the good news: the plan for financial well-being (and recovery) is pretty simple and straightforward ‒ and I’m about to spell it all out for you.
We’ll begin with the big picture in this article, and then continue to look at how investment works in the next.
So here’s the basic plan for your and your family’s financial well-being:
Step 1: Gain control over your money.
You need to lay out your financial reality on paper, so you know how much you have coming in, how much going out, and how much going into the bank for emergency and investment purposes.
Then you need to change your work, spending, and savings habits to make sure you’ve got more coming in than going out, with a sufficient amount going into the bank ‒ to fuel the next step…
Step 2: Capitalize.
In other words, put money in the bank so you can then put that money to work for you.
As we’re about to see, it’s not that simply putting money in the bank will solve your problems. (Though it is a good idea to keep some of it there for use as an emergency fund, for example.)
It’s so that, when you’ve got enough there, and your personal finances are truly in order, you can take this money in the bank and put it to use in some pretty powerful, and creative, ways…
Step 3: Invest.
Here’s a definition of invest:
“Expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.”
Notice that the emphasis is on expending money ‒ not time or effort. Sure, it does take some time and effort to invest, but that’s secondary. The real point is that you’ve already poured time and effort into making the money ‒ so with investing, you want to minimize the time and effort, focusing instead on letting your money start working for you (for a change).
A Whole New Approach To Your Money
Do you see what a massive mindset change this is?
Without a plan, people focus on making money, and pretty much see investing it as a luxury that would be nice if they only had the time (and money!). As we saw, this usually means you trade your time for money, and end up with not enough money ‒ or time! But when you have the right plan…
The primary reason you make money is to build capital ‒ which you plan on leveraging through the power of investing it well.
In other words, you know that the money you make is just a step along the way.
And once you understand how easy it is to leverage your money through investing it (which we’ll get into in the next post or two)… and how incredibly effective the right approach is… you’ll have some powerful motivation behind you.
Making money for the sake of paying your bills and staying afloat isn’t really all that motivating.
Making money to pay off debt isn’t much better, after a while. Sure, it’s good to feel in control by paying down your debt ‒ and it’s fantastic to see your debt shrink!
But that’s just solving a problem, not building your future…
However, when you know that the cash flow you’re generating is being set aside specifically to be multiplied and compounded over time (and it doesn’t take as long as you might think), so that it’s working for you in order to fuel your lifestyle…
Then you’ll know what motivation is!
It’s a whole new approach to your money and retirement. A real game changer.
Without a plan for your own financial well being, from today through your retirement years, the topic of money and investing is going to be stressful for you.
By pulling together a reality-based and workable big-picture plan, you lay the foundation for becoming an investor. Even before you’re ready to invest, you’ll be thinking very differently about your money, your time, and your retirement.
And you’ll have the perspective you need to understand the specific approach to investing that we’ll begin to lay out in the next article…
Give us a call at (801) 990-5109 or schedule your free appointment here to begin your personalized Wealth Plan. We’re happy to help you clarify and reach your financial goals by investing in real estate.