Money – it’s influential, stressful, and tantalizing. I’m always interested in people’s reaction to receiving money because most of the time it’s contrary to what’s expected.
What do I mean by that?
I’ve had lengthy conversations with clients about their unrealized goals, and almost every time lack of funding is what stands in the way. The goal may be buying long-term care insurance, adding to an IRA, or contributing toward their daughter’s wedding. So you’d think when they have some extra cash it would be immediately applied toward their wishes.
What happens when they get a bonus or tax refund? It’s spent in an instant. Literally gone by the end of the week on a random assortment from Target, an unnecessary home purchase, or treating friends to an upcoming Pats game. Why? None of those things are a priority, or were even on their radar.
It’s because people often have an all or nothing attitude about making progress and want instant results. I see the problem as three-fold, which POWWOW makes a point of addressing for ongoing clients:
- The goal hasn’t been put into context.
- Incremental savings have no safe place to go.
- Lack of accountability perpetuates a self-defeating attitude.
When a goal isn’t put into context it seems daunting and likely impossible, turning the goal into a dream. Take the time to break the goal down into manageable steps. For instance, you want $5,000 to contribute to a deductible IRA:
- Give yourself some time to make this happen, perhaps a year.
- Calculate your new savings goal, $100/week or $14/day.
- Take time to better understand your cash flow. This can be done by making mental notes throughout the day on how to cut spending, freeing up time to earn extra money, or easily creating a budget to follow in our client portal.
- Establish a safe place to put savings, which I believe is the most important step.
- This place should be separate from checking. I also don’t like the idea of cash in an envelope. Any form of hard cash savings needs some sort of super glue seal and tally sheet to show your progress. Check out Ally’s 0.50% no minimum online saving account(aghhh, yes I know, interest rates have fallen sharply!) and my post on “Managing Large and Irregular Expenses.”
- Track your progress and savor success. For a $5,000 goal, seeing your balance increase might be all you need to feel motivated.
For big-picture goals, working with a planner that can run projections, remind you of to-dos, and give pep talks may be necessary to stay on course.
Call POWWOW to discuss your goals and hear more about our services. 978-685-PLAN.
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