Sermons, partying, hangovers, diets, …. and financial planning
One day I woke up with an atrocious hangover, and it hurt so badly that I told myself, 'It's time to stop. I can't do it anymore. It's not good. It hurts too much.'
Okay, bizarre title, but bear with me:
Financial planners often feel as if they preach sermons to encourage needed planning.
And like most “you should be doing this!” sermons, their preaching is met with serious resistance.
So here’s a different approach:
In college, you must have had at least one morning where you woke up with cobwebs in your head, regretting all the partying you did the night before. Not only did you feel sick, you couldn't believe how you acted or worse, had no recollection. And to make all this worse, your bank account is overdrawn and you maxed out your credit card.
It's not that you didn't know better. Of course you did. But you told yourself, “hey, I’m young, now’s my time to live!”
Okay, now imagine that we are talking about you waking up at age 60, after several decades of living it up, with more than cobwebs in your head and an empty wallet: you don’t have enough to retire. In fact, you have to work much longer than you ever hoped.
You spent decades eating out, entertaining, going on costly vacations, buying expensive clothes and such instead of saving what you needed. Unlike partying in your 20s, where you can catch up on by being frugal later, at age 60 you can’t catch up and you don't get to go back a few decades to make up what you needed.
Just as you know better than to party all the time, you know that you should be planning for retirement, even if it is many decades away. At the same time, you don’t need to sacrifice everything today for the future.
What you do need to do is find a balance in your spending and saving. And that is where planning comes in.
Here’s one example: managing your cash flow:
Preparing a budget requires some serious work and isn’t that fun. You need to review 12 months or more of spending, analyze it and then use it to project and inform future spending. You will see where every dollar came in and went out. That can enable you to shift where some dollars go, so you save more for future goals.
Preparing a budget is unpleasant and having the discipline to follow it is challenging. But, like following a diet to lose weight, your financial health will improve. If your doctor says your health depends on a diet, you follow it.