I once had the pleasure of knowing an extremely successful insurance salesman named Pete. He routinely won company vacations to Hawaii and other intriguing places by being the agency’s best salesman in the Midwest. The man simply didn’t know the meaning of the word ‘No’. And I can only remember him to utter the phrase “I don’t know” once. Like many of his generation, he had an amazing self-believe and self-reliance; the product of some incredibly difficult times. Pete was raised during the great depression. Like many children of the time, he spent much of his time doing whatever he could to earn a little money to help his family. He once told me that he got his start in sales at a very young age, selling pencils on a street corner. He credited his strong sales ability directly to his childhood experience. He simply stated “I had no other choice”.
In a recent article by CBS news, the author discusses the unintended consequences, of having too many choices. The subject is specific to parents helping their children with college finances and beyond. If you are at or approaching this stage in life, you should definitely read it. But the ‘story behind the story’ may be that it’s become increasingly difficult to recognize the impact of our choices. Even though we’ve seen the catastrophic results of credit card and mortgage debt within a generation, household debt is now at an all-time high; with student loan debt now greater than that on credit cards and only second to mortgages. These are the three elephants in the room. Growing bigger and eating more than ever. And as if that wasn’t enough, most of us are choosing to feed the cute little critters that come our way each day; like restaurants, cable, automobiles, costly entertainment, and the latest electronics. The feed bill is getting bigger… and it’s not going away.
There are a lot of theories about how consumers have returned to overspending. Several of my previous articles discussed identifying ‘wants’ versus ‘needs’, household cash flow, and budgeting. Perhaps that seems overwhelming. Maybe, as a start, it would be easier to limit our choices.
Here are a few Steps For Today which will help you get started:
– Talk to your friends about cutting their cable costs. The streaming choices are changing almost daily. And many homes now get HDTV with multiple sub channels.
-Think about what nights you can prepare meals at home. Cooking seems to be a lost art. It does not have to be complicated. It can be as simple as a Chef’s Salad.
– Discuss with your friends the ways they’ve found to save on regular expenses.
– Learn to expand the rule of 72. To approximate how long an investment will take to double, divide 72 by the interest rate. For example a 7.2% rate (a conservative market average) will double the investment in 10 years (72÷7.2 = 10). Do this before every purchase and you’ll get really good at visualizing the long-term financial impact of your choices; and the importance of starting in your younger years.
– Consider an alternative to that $5 cup of coffee. Or use it as an occasional incentive after accomplishing a goal.
– For motivation, take those coffee savings and put them into the investment calculator at: https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator.
– Stop and examine your motivations for wanting the top-of-the-line, next generation products. Perhaps what you have, or a model with less bells and whistles is sufficient for your needs.
– Get a sheet of paper, or your journal, and make a list of your self-imposed limits.
– Start each day reviewing your list of temptations to avoid.
– Finish each day giving yourself a pat on the back for the temptations you overcame. Journal what you saved and how you’re going to invest that amount towards your savings.
– Lastly, take action! Take your savings and set them aside in a location dedicated for your emergency fund and retirement needs.
Success breeds confidence. Learning to limit our choices will surely make it easier to plan for the future. And the best thing you can do for your children is to give them this skill and confidence as well.
As always, thanks for reading.
And remember to take the next step…