By Pat Moran, AFLI
When we stop to think about how much money we make over our lifetimes, it is pretty amazing. With all that earned income, why aren’t we financially independent? As we discussed earlier, there are a lot of reasons, and lots of excuses, why we are struggling. However, it goes back to a lack of planning, because we are planning to fail!
Many of us don’t put our money to work, failing to take control of our financial lives. One of the biggest hurdles is blaming ourselves for not making enough money. “if we earned more money, our personal and financial problems would go away!” However, in talking to many people, and looking at the stacks of research and studies on achieving financial prosperity, very little seems to do with how money we make. Instead, it’s what we do with what we make, making sound financial decisions, and putting our money to work, that has the greatest impact on happiness. We ought to be able to list a number of things to be thankful for, such as my family, my wife, friends, God, food on the table, a roof over our heads, a job, etc. that have little to do with the amount of money that we make. There are many stories throughout the media, where very wealthy people are dealing with problems just like us, or are extremely unhappy. Their problems seem to have little to do with the amount of money they make, but rather events that cause lots of unhappiness, or poor decisions. There have been many times when we are unhappy about something, and money wasn’t the cause of the problem. It becomes easy to blame everything on financial shortcomings due to the way we were raised, our backgrounds, gender, or others, but mostly it was our decisions that created the problems. Having a plan, understanding our finances, and practicing good financial habits allows us to manage our lifetimes earnings for greater financial success, and less stress.
Regardless of your income, we can make our money stretch further if you can properly plan, and avoid mistakes. At the very least, follow a few of the principles that we have outlined throughout this booklet, and you will head in a positive direction. As you practice better habits, you will realize that personal finance becomes less difficult, and something that you do regularly, like tying your shoes or brushing your teeth. We should realize that our lifetime earnings are our greatest financial asset, the ability to make money is something that everyone can do. When you stop and think about what can amount to millions of dollars, we should easily have our expenses covered, be financially comfortable, and retire easily, but we don’t. However, chances are that if most people were handed a check for what they would earn over their workings careers, they could probably plan and solve for the many financial hurdles they have during their lives. Or can we, because we have heard the many stories:
78% of NFL & 60% of NBA players go bankrupt 5 years after they retire according to Sport Illustrated.
- Numerous movie stars and famous athletes have gone broke like Mike Tyson, and his estimated $ 300 million of earnings, Nicolas Cage, who made over $ 40 million in 2009 alone, or Wesley Snipes and his 3 years of tax evasion.
- 70% of lotteries winners go bankrupt
There are lots of reasons for these failures, such as pressure from family and friends for money, trusting the wrong people, their ego’s get in the way from needing advice, or they have all the answers. However, probably the biggest (2) problems are shared by many of us, not planning for the future, and not practicing good financial skills. As talented as an actor, or athlete might be, they don’t watch their budgets, or have any wealth management skills. Lottery winners are given a huge windfall, but don’t know the first thing about managing the money. As we plan for our lifetime’s financial needs, keep a few things in mind:
- We are first during our lifetime of earnings, meaning that we put away something first, then tackle our bills and expenses. Whether it’s getting paid every week, every 2 weeks, once a month, or when we close a deal doesn’t matter. We often tackle bill first, and hopefully save something from the money that is hopefully left over. Hopefully becomes a mouthful because usually there isn’t anything left over, so we never save or have extra money. However, now we are saving something first, and what’s hopefully left over provides spending or savings flexibility.
- We usually can make more money by spending less, saving more. Don’t bank on future expectations, promises, dreams, or possibilities as money to spend, because when the check actually clears the bank, that is the money you should count on.
- Many millionaires have shared stories about how they became so successful, which was hard work, save always, and LIVE BELOW OUR MEANS!
- Make rules for your spending and stick with it, such as, “we are only eating out once a week,” “We won’t spend more than $ 10,000 on a car,” “We will save $ 400 per month” Stick to your plan, and personal affirmations can also reinforce good habits, such as “I’m on my way to a great retirement,” “I feel good about saving!”
- Realize that every financial choice, has a cost, “If I buy this expensive car, I need to work 6 years to pay it off,” “Or by spending this much money means that I can’t make that extra payment on the house, or throw in extra money towards that college savings fund.”
- When you arrive at the place that makes you feel happy and financially comfortable, STAY THERE! For many people, this is the place they want to be, don’t keep strecthing.
- Finally, start saving as early as possible, and the most effective financial planning tool is a Unless you know where you are spending your money, and how much, you can’t begin to form the foundation to personal financial success.
Putting our money to work through careful planning, gives us greater control over our financial futures. Budgeting helps to create our spending plan, so that our money can work as hard as we do for it. It’s this plan that can allow us to fulfill a lifelong benefit of financial well-being.