Basics of Planning

Make Sense of Your Financial Planning

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If you go searching for financial planning help, you will find a great many tools at your disposal, from online calculators to professional financial planners who can help you chart a course for your future.

Whether you’re using online tools or seeing a professional face-to-face, the logic they will use is often the same. First, they will sit down and total the major expenses you expect to face over your lifespan: paying off debt, marriage, childbirth, kids’ college, new houses, retirement, et cetera. Then they divide the grand total of your expenses over the number of years you expect to live through to pay them off, adjust it for compounding interest, and arrive at a target percentage of your income that you should be saving each and every year of your life in order to afford these major milestones.

Often calculations like these will give you worrying results. This arithmetic often tells you that you must put aside an enormous amount of income into savings or else you will never be able to afford to retire.

Fortunately, there are a couple of crucial flaws in this reasoning that may provide some relief. Young couples often stay up late worrying how they’re going to pay for a house, kids, college, and retirement, and the answer is simple: you’re not paying for all of those things at the same time. As we advance through our lives, new expenditures come up and old ones go away. When you buy a house, the money you were setting aside for a down payment turns into money you set aside for kids. When you send your kids off to college, the money you were setting aside for them turns into money you set aside for retirement. You don’t have to save for all your big expenses in advance: your cash flow (which will tend to increase as your earning power grows with age and experience) will help accommodate different expenses at various times.

Don’t get us wrong: saving more money is better than saving less money. But it’s important to remember what you’re saving money for in the first place, so that you can spend money on the things you want and need in life. Call us if you need any help making your plans and planning work.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The Ant and the Grasshopper, Revised

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Most of us are familiar with Aesop’s fable of the ant and the grasshopper: the hard working ants slave away all summer building nests and storing food while the lazy grasshopper idly eats and makes merry. Each one calls the other foolish: the grasshopper tells the ants they should relax and enjoy life, while the ants admonish the grasshopper to work harder and prepare for winter. In the end the ants have the last laugh when winter comes and they have food and shelter while the grasshopper has none.

It should be noted that Aesop was not a bug expert. If he was, he might have realized that grasshoppers only live a few months and do not survive long enough to even see winter. Knowing this, the grasshopper was actually quite wise to ignore the ants’ advice. He lived his life to the fullest, with no time wasted on unnecessary labors.

The true moral of the story is this: it is equally foolish to hoard wealth we’ll never use as it is to squander wealth that we’ll need in the future.

None of us knows the date that is going on our death certificate. We should strive to emulate both the ant and the grasshopper, because we never know which one we’ll wind up as. Like the ant, we should work hard and save wisely to prepare for the future. But like the grasshopper we should also enjoy what we have, while we have it. We need to have a little fun every day, because we never know how many days we have left.

The Very Best Way to Retire

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Have you been reading those articles with titles like “Ten Best Places to Retire” or “The Best Investments for Retirement” or “Six Best States for Retirement Taxes”?

Being in the business of retirement, and voracious readers besides, we read all that stuff. And we talk to scores of people about their retirement plans, and scores of retirees as well.

There is one sure thing about retirement: no one but you knows your best way to live in retirement. The articles are useful only to prompt your own thinking about your own situation. Most retirements are successful, in the sense that people are happier with greater freedom to pursue their interests and control over their schedules. These people often say, “I don’t know how I had time to work” because they are so busy. One client told us that “work is way over-rated.”

Other retirements do not work out as well. We believe there are a few aspects of retirement that successful retirees thought out in advance.

Where to live? A minority of people move to retirement destination locations. Most stay close to friends and family. Others split the difference and travel in winter or adopt a snowbird routine. With planning, you can do what you want to do.

What type of housing? Residential living encompasses more choices than ever before. Some people enjoy yardwork or gardening, or like to putter in the garage or shop. Others can’t wait to give away the rake and mower. The amenities of a condo or apartment community like a pool or exercise facilities are attractive to some. A townhouse setup with exterior maintenance and lawn care is the right choice for others. Staying in the family home is perhaps the most common option. Where do you want to wake up every day?

What to do? There are as many retirement lifestyles as there are people. Some spend much time with family, attending ballgames and school events of grandchildren, helping with child care or errands. Others are busy with some combination of fishing, hunting, golf, tennis, hiking, traveling, exercising, boating or travel. Social clubs, meals with friends, bowling leagues, or card parties dot some retiree calendars. Part-time jobs are desirable for an increasing number of retirees, both for a little extra income and for the enjoyment. How do you want to spend your time?

A wise person once said, “Time is what life is made out of. Be careful how you spend it.” Your time, your life. Think about it. We are here to do the math; call us if you would like an office appointment or telephone conference.

Four Habits for Financial Success

© www.canstockphoto.com | merc67

They say it takes all kinds to make a world, but we’ve noticed four habits that most financially successful people share.

1. Put something away every payday. Researchers were surprised to learn that some top-tier earners end up broke in retirement, and some bottom-rung earners retire with considerable resources. The successful savers tended to have the habit of putting something away every payday. One client told us, “It doesn’t matter how much you make, it matters how much you keep.”

2. Take on sensible debt, and no other kind. The problem with using revolving credit to “make life better” is that revolving credit tends to make life worse. If you carry a credit card bill of $1,000 from month to month, this means that you got to spend $1,000 that you did not have. But it also means that you have $240 less to spend every year in the future until the debt is paid off. By reaching for the illusion that you could spend more, you actually will have less money overall.

3. Nurture and grow your human capital. Your skills, knowledge, habits, training, experience and education are the sources of your human capital. This is your earning power. Some of the most important parts are free: a positive attitude, sound work ethic, and a desire to be of service.

4. Improve your odds of getting where you want to go by spending some time thinking about it. As Yogi Berra once said, “If you don’t know where you are going, you’ll end up someplace else.”

Most of our readers do not need these lessons—you live them. We are writing in hopes of provoking discussions with the younger people in your life, ones who may not know what you know about money and life.

As always, if you would like help with the fine points or want to discuss some aspect of your plans or planning, please call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.