Don’t Save for Retirement

One of the big mistakes we all make when considering making a change is trying to do too much at one time. We decide we need to eat better so we plan to eat less meat and more vegetables – better make those organic, and even though I don’t cook, I’ll make it all from scratch. On and on, our plan gets bigger and better and as a result, less likely to be executed.

What we should do is plan in baby steps. Start small and celebrate your successes.

Today while listening to a coach advise one of his clients, I just wanted to yell, “Baby Steps”.

The client was a 28-year-old living in Chicago making 45K a year. She has a student loan balance of 30K, a $1000 emergency fund and a very generous employer who monthly pays an amount equal to 15% of her gross into a 403b. The coach was harping on and on about getting this student loan paid off so she could save more for retirement.

Really? Come on; she’s trying to live in Chicago on 45K. First thing we need to do is throw this girl a party; she is a rock star – 28 with 37K in retirement and no credit card debt. Who does that? The answer is very few.

The coach was right when he said that she needs to focus on paying off those student loans. But let’s not try to inspire her by tempting her with calculations of how much she could be worth when she’s 67. She has a lot a life to live before 67. Maybe a really cool vacation, a wedding, a condo? Live a little, girl.

We need to give this young woman a chance to learn that saving is not a bitter pill; it is not a diet devoid of chocolate. Once she sees herself as a saver, her financial future will be much more secure.

The way to learn to be a saver is to start small. In the beginning,  it is a lot easier to save for a want rather than a need. So what do you want that we can get in three paychecks? How much can you set aside out of each check?

Swim with Manatees – $35 plus lunch and gas, $35 out of each check

Take your mom to Julio Iglesias – 2 tickets at $60, $40 from each check

4 night Cruise with your friends – $300, $100 out of each check

Try it. Pick a three paycheck goal, something fun and get going.

Once you can successfully do the three paycheck goal, try a six paycheck objective.

Visualization helps a lot; so draw a thermometer, post it on the fridge, and color it in after every check. Get the kids involved and they will naturally grow into savers.

It is easy-peasy to learn to be a saver:

1)       Pick a little goal

2)       Set the time period and the amount from each check

3)        Record each increment as you save it – in color on the fridge door.

4)       Party! You are a saver!

Of course you know that we do need to save for cars and retirement and less fun things like roofs and medical needs, but once you become a saver the rest is easy.

The Redshirt Wealth Building Plan

I recently had a conversation with a very bright, but self-admitted and purposefully undisciplined woman. She wants to do better with her money but does not want to change her ways. No Budget for her – No way, No how.

This presents quite a conundrum for a whiz-bang financial coach. Someone whispers they want to become wealthy; I’m all about finding a way to make it happen.

Here’s someone who professes a desire to “do better”. With a bit of conversation, we could grow that tiny seed of desire into a little sprout of a goal. Unfortunately, without a willingness to change, our sprout, in all probability, will wither and die.

This woman has a lot of wealth-building potential. She’s employed and in a position that holds promise for future advancement. She is not overspending on her basic living expenses; housing, utilities and transportation costs are all reasonable.

But she is not ready to change. Every dollar that finds the way to her hand is going to be spent on “good times”. She’s not going to make a budget and she’s not going to track her spending.

Enter the Redshirt Wealth Building Plan.

You know how a college basketball or football coach might hold out a very talented athlete their freshman year, allowing them to grow and mature a little more without losing eligibility? Well, we use that same idea here. Redshirt freshmen get to practice that first year; they just don’t get to play in the games.

Participants in the Redshirt Wealth Building Plan:

Stop borrowing. Redshirts may not borrow. Hide, cut up or give your mom your credit cards for safekeeping.

Embezzle Funds. No; not from someone else – from yourself. Open a savings account; ing is easy and online. Do it right now. We don’t ask redshirts to think much just yet. Decide how much you could live without each paycheck and make that transfer happen automatically.

Pay as you go. Live your life using your debit card and the money in your checking account. Don’t look at your savings, don’t even think about it and definitely don’t touch it.

Measure your Progress. Set an appointment with yourself every 60 days and ask yourself two questions: Can you increase your savings amount? Are you ready to make a commitment to get in the game?

It’s OK to give yourself some time to develop some muscle; but be sure to follow the redshirt plan so we don’t have to waste your wealth-building efforts digging out of a hole.