Which Comes First? The Money or The Plan?

- by Pocahontas

Suppose you took a survey of 100 people at age 65 and asked them, “Do you want to wanted to retire wealthy?” How many of the hundred do you think would say, “Yes”? Obviously all 100! The real question is how many of them do you think actually make it? 10? 25? What if I told you according to the Department of Health and Human Services (who actually did that survey) the answer is 1! Yes, one out of that hundred will retire wealthy. So what happens to the other 99, you ask? Well, 36% of them are still working. Do you think the little gray haired people greeting you with “Welcome to Walmart” are working because they WANT to or because they HAVE to? Now another 54% of them are dependent. Dependent on what you ask? Dependent on things like Social Security (which many call Social “IN”security), family members (ever heard of the elderly having to move in with their daughters and sons?), or friends. Five percent of them are deceased (and we want to stay out of that category as long as possible!) And the other 4% are doing “okay”. This means they were able to at least maintain the same standard of living they had during their working years in retirement. So let’s examine this, shall we? If you look at the statistics closely, you have a better chance of being DEAD than you do “okay” in retirement! And what’s more if you add up the 54% that are dependent plus the 35% still working that equals 90% of our society retiring B-R-O-K-E! Now do you think when these people were in their 20s, 30s and even 40s like you are they thought they’d be broke at retirement? Of course not! Most of them at least thought they’d be in the “okay” category! So then the million dollar question is, “what happened to them?” Let’s examine two main reasons why they failed.

Well, for starters have you heard the saying, “Keeping up with the Jones?” It typically refers to those who are driving cars they can’t afford and living in homes they don’t make enough money to furnish all for “appearance’s sake”. The problem with this is these people don’t know the Jones they’re trying to keep up with are broke! Sure they may appear on the surface to all of us who are on the outside looking in to be living comfortably with all the trappings of a nice life. But if you look deep inside their financial picture you’ll see multiple credit card payments with more going to interest than principal plus little to no savings and investments which add up to a negative net worth. Bottom line, people are blowing money on material things with no thought to the fact that they could be building up wealth.

Also, there’s an old adage that says, “most people don’t plan to fail they fail to plan.” Wouldn’t you agree? People don’t PLAN to retire broke. At age 25 or 35 they are not sitting down with their spouse trying to figure how to have very LITTLE money at retirement. But the problem is they don’t PLAN at all. And a wise person once told me, “a plan is not a plan unless it’s written.” If you have no written financial plan, that’s as bad as trying to drive to Kalamazoo, Michigan with no road map or GPS! A good “financial road map” would answer 3 very important questions:
What is your FIN (Financial Independence Number)? That is the exact amount of money you need to retire at the standard of living you desire.

* How much do you need to be putting away monthly to get there?

* Where do you find the money to do it?

* Ask yourself, “if you were planning to have your dream house built would you rather the contractor use a blueprint or just “wing it”? Then why are you so willing to “wing” your financial house everyday with no blueprint from now until age 65? Think about it.
Pocahontas is a licensed Financial Coach and has been in the industry since 2005. She can be reached at pfslynette@gmail.com.