The Carr Report: Competing goals + no plan = broken dreams

by Damon Carr, For New Pittsburgh Courier

The first question I ask during a financial planning session is, “what are your short-term and long-term financial goals?” Instead of responding with concrete financial goals, the answers generally relate to a particular problem that they’re currently facing that’s preventing them from getting what they want. It has been said that the average person spends more time planning what they’re going to wear to work the next day than they do planning their financial future.

Most of us never took the time to identify specific financial goals and establish time frames on when we would like to accomplish our goals. Nor do we devise a plan to make our goals a reality. We simply get the idea that we desire a particular thing, whether it be the latest gadget, latest fad, new home, new car, college education, etc.—and impulsively pursue it. Only when we are thwarted in our pursuit to obtain the things we want or when it’s literally the day before it’s time to deal with serious financial decisions do we begin to seek professional advice or conjure up ideas to get what we want or avoid what we don’t want.

The information, advice, and ideas we seek are very specific. How do I get out of debt? What do I need to do in order to qualify for a mortgage, car or student loan? How do I avoid bankruptcy or foreclosure? How do I get this account off my credit report? What is the best way to save for retirement? True financial planning is holistic. When we address one financial subject without considering the impact on the entire financial picture, we’re left exposed to more and more financial breakdowns leaving us to wonder why the little man can’t get ahead.

By not identifying specific goals, prioritizing these goals and giving each goal a time frame, many of us unknowingly have created competing goals.

These competing goals are tugging at our paycheck. A financial goal is a desire, want or need that has a price tag attached to it. When you spend money, you have, in effect, fulfilled a financial goal. You obtained something you desired, wanted or needed that cost you money. Each purchase we make hinders our ability to fulfill another financial goal because our purchase reduced the available money on hand. Money is finite. There’s only so much that will flow through our hands during our lifetime.

 

As long as God continues to give us breath we’ll go through various stages in life that will require major financial commitments. From starting a family to building a nest egg for retirement to leaving a legacy that will provide economic support to those who depend on us financially after our death. Unfortunately, too many of us live in the moment. We’re only concerned about what feels good right now. We’ll deal with life challenges as they present themselves.

Given the fact that if you average a mere $30,000 over a 35-year working career (age 30 to age 65) you’d earn over $1 million. I hold the belief that all can witness the true American dream which is to one day be debt-free—including paying the mortgage off early. Being properly insured. Having a fully funded emergency fund, having additional cash saved to purchase big ticket items, funding our children’s college fund, and building a respectable nest egg for retirement. The stark reality is however that:

78 percent of Americans are living paycheck to paycheck

85 percent of Americans have a true net worth of less than $250

62 percent of Americans say money is their biggest problem

60 percent of American households do not have an emergency fund

Money problems are the primary cause of fights between married couples

51 percent of marriages end in divorce—of those divorces, 80 percent cite financial problems as the leading cause

60 percent of college students leave college with student loans and credit card debt

Less than 30 percent of Americans own their home independent of a mortgage

90 percent of those 65 and older retire or die broke

Why are so many people struggling financially in America the great—the land of opportunity? I believe it’s because we ignore one or more of “The four P’s” to accomplishing your financial dreams—Priority, Patience, Planning, and Persistence.

Priority—When you prioritize your goals, you establish the matter of importance. For example, if you want a new car, a new house, pay off credit card debt and you want to save for emergencies and retirement, you list these goals in order of importance, for pursuing all of them at one time will minimize or void out the possibility of doing the other. So often I talk to people who say they can’t seem to save for retirement, yet they owned brand new cars their entire life. That tells me two things—new cars were more important than a retirement portfolio and if they did not have car payments every month for the past 20 years they’d have a nice retirement portfolio.

Patience—Patience is a financial virtue. You can have everything your heart desires. You just can’t have it all right now.  As you begin to prioritize your financial goals, you’ll learn that you cannot afford everything right now and that some things just have to wait. Being able to delay certain purchases temporarily will help you avoid mountains of debt and interest charges.

Planning—Nobody plans to fail, they just fail to plan; it’s an often-quoted phrase in the financial industry. I advise that we heed the advice and plan since most of us have witnessed firsthand what the lack of planning has gotten us—NOWHERE!

Persistence—Aspiring to one day be debt-free, properly insured, having a fully funded emergency fund, saving money to purchase big ticket items, paying your children’s way through college and building a respectable retirement nest egg isn’t an easy road to travel. Your friends, family and peers are all following the 90 percent crowd who’ll retire or die broke. The temptation of wanting everything right now will never go away. In order to fulfill your dreams you have to persistently prioritize your goals, persistently plan and persistently be patient despite the many temptations and challenges you’ll face.

(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website @ www.damonmoneycoach.com)

 

 

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