by Damon Carr, For New Pittsburgh Courier
Well over 10 years ago, I was receiving so many calls and referrals from people seeking financial advice for their friends, children, family, co-workers, and church members—it inspired me to write an article entitled “I’m talking to YOU!” In this article, I made it emphatically clear that NO ONE was exempt from sound financial advice. To this day, I find it interesting how people think “other people” could use sound financial advice but never “themselves.” I’ve grown in my understanding over the years. I was right then but I know now why people mistakenly think others need financial advice but think that they’re standing on a solid financial foundation. They’re either in denial, clueless, misinformed, and/or too embarrassed.
Money doesn’t come with instructions. Couple this with the fact that we’re sold on how to manage money, not taught. We’re doomed from the start. Everyday we receive millions upon millions of marketing messages scripting the narrative for our lives. Most of us learn from marketing messaging: what’s cool and hip, what’s trending, what to do, what not to do, what to buy, what not to buy. They prey on our dreams regarding how we want to live our lives. They sell us into being broke—just like the Joneses. Who are the Joneses everyone is trying to keep up with? An illusionary model of success. In each marketing message, the marketer has one goal—to extract money out of our pocket and put it into theirs.
Nearly 80 percent of Americans are living paycheck to paycheck, robbing Peter to pay Paul, struggling to make ends meet. That was before COVID. We’re so busy trying to figure out how to make ends meet, we overlook the obvious solution: Focus on reducing the E.N.D.S. (expenses and debts).
In this article, I’m not focused on those who are living paycheck to paycheck. I want to talk to the people who are able to pay their bills on time, have a decent credit score, take a vacation here and there, have a few dollars in the bank, and think they’re standing on a solid financial foundation. Are you doing well financially? Are you properly insured? Do you have your spending under control? Are you adverse to debt? Are you aggressively saving for short-term and long-term goals? Do you have a will and estate plan? Are your beneficiary designations updated? Do you understand the investments within and outside of your retirement plan? Do you understand the terms of various financial documents you signed including; mortgage, insurance, savings, investments, trust, will, and power of attorney? How long will you be able to pay your bills if you lose your job tomorrow?
Comparing yourself to 80 percent of Americans who are living paycheck to paycheck, you assume you’re doing well. Success isn’t measured by what you do in comparisons to others. Success is measured by what you’re doing in comparison to what you have the potential to do. Are you tapping into your full potential?
Here’s another startling statistic. 96 percent of those age 65 and over retire or die BROKE. When you hang up your working shoes, the real day of reckoning presents itself. You find out how well you managed money over your working career. Those paycheck deposits slow down and the amount of the deposits are much lower. Seniors know how hard it is when that paycheck stops and all you can bank on is that $1,500 per month Social Security check—assuming you qualify for the average amount. If you’re under 50, few of us can bank on receiving a pension in addition to social security. Average pension varies between private, state, federal and military pensions. Suffice it to say, the average is right around another $1,500 per month—if you have one. Let’s assume you receive both pension and Social Security. $3,000 per month would be nice if you retired your credit cards, car loans, student loans, and mortgage debt before you retired from work. Most don’t. I’m reminded of an online “meme” showing a 101-year-old celebrating paying off his student loan debt.
If you’re not a part of the 80 percent group living paycheck to paycheck, there’s a 96 percent probability you’re in the group that’s going to struggle come retirement. That is if you don’t get serious and own up to the fact that “You need to Get A Grip On Your Money”—NOW!
Message to those of us who are in denial, clueless, misinformed, or too embarrassed. Financial problems don’t show up in your ability to pay your bills on time or having a perfect credit score. Financial problems show up in your inability to consistently save and invest money without tapping into it early. This happens as a result of overspending, undersaving and/or not properly managing the money you work hard for. Below are some red flags that should sound off your financial alarm. Heed these warnings. Take the proper steps to get a firm handle on your money or risk struggling financially either now, tomorrow, or in retirement. If money could speak, it would say, if you save me today, I’ll save you tomorrow.
• Your savings account is a deferred spending account instead of a savings account where money grows
• No emergency fund
• No retirement savings
• Retirement balance is less than your annual salary
• Car loans are higher than your retirement savings
• Credit card balances are higher than your emergency fund
• Total balance of all automobiles including cards, trucks, motorcycles exceed 50 percent of your annual income
• Overly dependent on one source of income
• Credit card balances are more than 10 percent of your credit limit
• Car payments are higher than 15 percent of your net income
• Housing payment is more than 25 percent of your net income
• No medical, life, disability, home, rental, or car insurance
• Investments are highly concentrated in a few individual company stocks
• Don’t understand various financial products you have
• You focus on building your credit score instead of building your net worth
• You don’t know what net worth means
•Mortgage balance is more than three times your annual income
• Making minimum payments
• Prioritizing paying for fun and having a good timocial Securie over paying bills
• Inability to say no to yourself, your children, and family and friends when you don’t have it.
(Damon Carr, Money Coach can be reached @ 412-216-1013 or visit his website @ www.damonmoneycoach.com.)