One of the lessons most often heard by young people new in their careers is, “Start saving now for retirement.” Unfortunately, it can easily fall on deaf ears because it is difficult for youth to imagine themselves growing old and living off money they’ve saved for decades. Not to mention how they have to deal with the FOMO (fear of missing out) or YOLO (you only live once) mindset.
If you can’t imagine the older version of yourself, try the aging booth app. After you snap a photo of your face and see yourself age 10 or 20 years, answer two questions: 1) What kind of life do you want your future self to have? 2) What behaviors with money do you need to improve or modify to give yourself the best chance at making your future life a reality? When Al and Lesia answered these questions many years ago, learning about investing was one of their action steps.
Once you understand the basics of what to do with your money, the biggest challenge is taking action and having the discipline to duplicate the appropriate behaviors over and over for years. The second biggest challenge is resisting lifestyle creep (i.e., the more you make the more you spend). This is where most people experience self-inflicted financial pain. It can be hard to put off spending a dollar today with the calculated hope of being able to turn that $1 into $4 in the future. Usually, once this task is mastered, the process becomes easier.
Accumulating new stuff throughout your life is almost second nature, but the excitement attached to the new stuff quickly fades away. You might thank yourself, later in life, if you learn early that time and money can be the best of friends. Or better yet, if you have an affinity for acquiring new things, why not figure out more ways to acquire new money. There are many ways to do this: business ownership, entrepreneurship, investor, real estate. The key is to determine which way is best suited to your behaviors.
Al thought it would be fun to look at how he and Lesia’s finances have changed throughout their 20 years of marriage. To answer this question, he opened an Excel file which captures two decades of their financial lives at a glance. There were two times when their net worth decreased from the previous year (10% of their marriage) and 18 times where it increased (90%). Those are pretty good odds. The largest decline was $134,972 and the largest increase was $698,734. Despite the ups and downs, their monthly behaviors have remained the same.
Life happens no matter how much you try to plan and prepare. Nobody is immune from situations that might make them tap into their emergency fund. Here are a few examples of unexpected expenses for the Riddick household from Al’s 20-year snapshot: basement flood, replacements of the AC unit, furnace, hot water heater, oven, refrigerator, dishwasher, and roof. On top of all that, Al was laid off in 2010. Whenever a new obstacle comes your way, the only rational thing you can do is meet it head on and figure out a way to get through it or over it as quickly as possible.
Spend some time, after reading this post, to determine what you want out of life and then begin devising a plan to get it.
