Is being self sacrificing a requirement for financial success? Yes.
There’s a powerful proverb that nicely sums this up, “Blessed are those who plant trees under whose shade they will never sit.” Here’s the good news; you can plant the tree and sit underneath it.
It’s possible to do two things at the same time. We can have great lives today while also taking actions to ensure great lives in the future. That’s what I want to help you create for yourself. I want to help you wisely meet today’s needs and desires, while also tending to those of your future-self.
Because God-willing, we’ll all be old one day. And that future version of you will be extremely grateful for the wisdom and actions of your current-self.
Here’s a key question; Can you delay gratification? Are you able to forego your current desires in favor of a better future? If your answer is no, you’re in trouble. In order to enjoy financial security and success, you need to start delaying gratification. Again, it’s possible to do two things at the same time. You can live a great life today and position yourself for long-term success. That’s what I’m interested in helping you to do.
For over 20 years as a financial advisor, I’ve been helping people to balance current needs and desires with future needs and desires. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
Let’s get started.
A sacrifice is required
In order to get good at money, we need to make sacrifices. In fact, in order to get good at anything, we need to make sacrifices. If you want to be healthy, you need to eat a proper diet and exercise consistently. If you want to learn a new language, you need to set aside time for studying. There are no free lunches.
If you’re living your best life today, and not setting aside money for your future, you’re setting yourself up for failure. And if you’re struggling financially today, you’re going to be struggling financially in the future as well.
An unfortunate reality is that almost two-thirds of Americans are living paycheck-to-paycheck, credit card debt burdens most, and very few are saving and investing for their futures. When we struggle with our personal finances, it leads to stress, anxiety, and worry. No one wants to live like that.
Rent’s due
Rent’s due. When does it make sense to pay for it? Does it make sense to pay it when you’re young and energetic? Or when you’re old and tired? Does it make sense to pay it when it’s cheap, or when it’s really expensive?
The answers are obvious. As we get older, some things get more difficult because we don’t have as much energy as we used to. And money has time value; the longer we wait to pursue our financial goals, the harder they become to reach. It makes sense to save and investing earlier rather than later.
Sure, when you’re in your 50s, you’re probably going to be making a lot more money than when you were in your 20s. But your margin of error becomes very narrow. With a limited window of time to invest, there are risks, such as market corrections, that can prevent you from reaching your financial goals. And you’re limiting your ability to benefit from one of the most powerful forces in the world, compound interest. It just makes sense to start earlier.
But you already knew that.
Just like you know you’re supposed to spend less money than you make, and buy low and sell high. But just because we intellectually understand something, doesn’t mean we actually do it. So how do we close the gap that exists between what we know and what we do?
The only way to live how you want is to know how you want to live. We need to get crystal clear on what we want our lives, current and future, to look like.
What do you want?
It’s easy to get caught up in going through the motions. Each of us follows predictable patterns and has habits for how we do things. It’s comfortable.
To change our behavior, it’s essential to create an exciting and compelling vision for our lives. Something for us to be running towards. Why is this necessary? Because sacrificing for the sake of making sacrifices isn’t sustainable. We won’t keep doing it.
Have you ever tried going on a diet to lose weight, only to gain it all back? We all have. It’s only when we make a commitment to change that we follow through on it. The only way we’re going to commit to making a change is if it’s in service of something greater. That’s why it’s essential to think about, and create a compelling vision for our future. And that’s one of our human superpowers.
The only way to live how you want is to know how you want to live. We can think about how we want our lives to be, make plans for bringing it to life, and to execute those plans. That’s where goal setting comes in.
In service of helping you create your compelling vision for your future, you can access our Goals course for free.
We all have choices to make
Will buying coffee prevent you from becoming a millionaire? Probably not. But it also depends on how much your coffee habit is. Here’s what’s important; I’ve never taken a vow of poverty, and I don’t expect anyone else to either. But we all have choices to make.
When we choose to spend money on one thing, we choose to not spend it on another. So much of success in life comes down to the choices we make. What and who are you giving your time to? What are you spending your attention and energy on? What are you spending your money on? The answers to those questions will dictate where you’ll be in five, 10, and 20 years.
If you’re a good steward of your most precious resources, you’ll be in an excellent position. If you’re a poor steward, you might find yourself exactly where you are today.
To be a good steward, you need to think about what you truly value (In service of helping you do that, you can access our Values course for free). Once you have clarity around your goals and your values, you can align your spending to them. When you’re able to do that, you’ll make better decisions that are supporting the life you want. The alternative is to continue being carried along by the current of life, and not living by intention.
When you face a decision about whether to do or buy something, ask yourself, “Will this bring me joy?” If the answer is yes, then do it. If the answer is no, then don’t. My experience is that we overspend on convenience, and I’m a big fan of convenience.
For example, there was a five-year period in my 20s where I ate breakfast and lunch out every day. It wasn’t because it brought me joy; it was because that was part of the professional culture I was in. Looking back, I spent a ton of money that could have been better allocated somewhere else. So I know how easy it is to do dumb things with money.
And while I made a joke about coffee earlier, it’s important to take small amounts of money into account. That’s because small amounts become sizeable amounts over time, and every bit matters. Pay attention to everything. If you can get something for 10% off, take advantage of it. Buy things on sale.
While it’s important to pay attention to the little things, it’s the big things that end up really hurting us. We overspend on our homes and our cars. Mistakes in those areas hurt extra because they last for a long time. Buying too much house isn’t necessarily a financial death sentence, but it’s pretty close. Think about it; if you’re paying $500 a month too much for your mortgage, that’s $180,000 over the life of your mortgage ($6,000 a year X 30 years).
For every expense, ask, “Why am I doing this?” If it’s for you, and you love it, move ahead. If you’re doing it out of convenience, or because you think you’re expected to, think twice about spending the money. Life is too short and too long. You need to make sure you’re doing things that you want that are aligned to your goals and values.
How to make it happen
You need money today, 10 years from now, and 30 years from now.
The best-case scenario would have been for your parents to start saving and investing money on your behalf when you were born. Second best would have been that you started putting 10% of your income away when you got your first job. The next best time is today.
Here are five things to do immediately:
Cash flow
Too few of us know how much we earn and how much we spend. We don’t pay attention to what we’re spending money on, and because of that, things fall through the cracks. To pay attention to your cash flow, go through the past 12 months’ worth of expenses. You’re looking for charges that shouldn’t be there, and for expenses you can get rid of. Log in to all your financial accounts and do a review at least once a month.
Learn more about managing your cash flow in this post.
Budget
A budget is simply a plan for your money. It lets you know when you’re on track to reach your goals and objectives, and when you’re behind and need to course correct. There’s not a right or wrong way to keep a budget, but you need to find one that works for you; meaning you’ll stick to it.
Learn more about budgeting in this post.
Get out of debt
Credit card debt keeps many of us stuck in a negative cycle. If you’re in the habit of rolling credit card debt over from month to month, paying it off must become a top priority. You can access our Get Out of Debt course for free.
Pay yourself first
The Golden Rule of personal finance is to pay yourself first. When we’re in the habit of paying everyone else first, and waiting until the end of the month to pay ourselves, we find there’s rarely any money left over for us. We break this habit by enrolling in our company’s 401(k), opening an IRA or brokerage account and setting up automatic contributions, or by setting up recurring monthly transfers from our checking into a savings account.
Make a plan
Finally, you have got to have a plan. The term “financial plan” is loaded, and it needn’t be. To create a financial plan, you need to decide how much money you’d like to have in the future, when you’d like to have it, then work backwards to determine how much you need to be saving or investing today. It’s prudent to create financial plans for each of your financial goals.
Closing
You are a wise and prudent person who understands the need to delay gratification, and to set money aside for your future-self. You’re also someone who’s capable of closing the gap between what you intellectually understand and what you actually do.
Please understand the time to get started is today. There will never be an easier time than today to do this.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course.
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