Mapping Out Your Financial Future

“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” ~ Warren Buffett

When I was little, maybe third grade or so, the idea of going to Fenway Park to watch a Boston Red Sox baseball game was thrilling. The noise of the crowd, the excitement of the game, the hot dogs, popcorn, soda pop and souvenirs. But all that cost money, so it was a rare treat, and one we only got when we visited my grandparents who lived right outside Boston, Massachusetts.

One summer my grandfather surprised me and my brothers, Jeff and Bob, with tickets to see the Red Sox play. He even gave us each a few dollars extra to spend on anything we wanted to eat or drink at the game. I had enough left over to buy a Red Sox baseball cap with the Boston “B” on the front.

At that age, I didn’t understand the concept of money. I had no idea what it had cost Grandpa to send us to the game. Maybe not much by today’s standards, but back then, it probably represented a week’s wages to my grandfather who was a self-employed carpenter. He and my grandmother had to watch their money carefully just to make ends meet.

Later, when I fully understood the expense to which he had gone to give my brothers and me such a treat, I would smile with appreciation. He was a wonderful and fascinating man – the best grandpa any kid could ever have. He did everything for us. So did our grandmother. When we went to their house, Grandma would serve us pizza for lunch. It may seem like a small thing but remember, he was a self-employed laborer and she didn’t work. To say they pinched their pennies was an understatement. They led simple lives. They didn’t travel. She did the laundry in her kitchen sink and dried the clothes outside on a wire clothesline.

As bored young boys, we didn’t appreciate it all. Not really. But I would realize later in life how they placed a greater value on their grandson’s smiles than they did money. I will never know what comforts they had to forego to send us boys to Fenway twice each year.

Dreams and Values

We all have unique dreams and values. I talk to people every day about what they see themselves doing in their golden years, and no two individuals are alike.

Some want to travel. One couple I met with told me of their plans to tour Europe and visit the Holy Land when they retired. The wife showed me a well-worn expanding file folder full of brochures and maps of the countries they intended to visit. That was their dream.

Another couple with whom I met had a small farm. Their ideal retirement was spending as much time with their eight grandchildren as possible.

Everyone is different. I have often heard that there are no two snowflakes exactly like. While I dispute this as a proven fact (no one has ever seen every single snowflake) I do not argue that each individual is unique. What about identical twins, you ask? Well, they may look alike and even share the same DNA, but even identical twins have unique fingerprints.

We each have our own dreams, goals and visions of the future. The purpose of putting together a proper retirement plan is so we can peer into that future and then do what I call “backfill.” In other words, firmly establish just what it is you want to do in the years to come, and then figure out a way to build up enough money to make that dream a reality.

Write It Down

I ask people to take a pen and piece of paper or notepad and write down their goals. Why? Because something unique happens when you do this. A sort of metaphysical energy is created between the brain and the hand that, as unexplainable as it is, becomes a force capable of propelling you to success. I am as certain of this as I am that somewhere, somehow, there are two snowflakes alike.

Okay, I may be exaggerating a little, but there is no denying that we are much more likely to achieve our goals if we can clearly visualize them. One of my favorite axioms from the all the inspirational and motivational books I have read is a quote from Napoleon Hill: “Whatever the mind of man can conceive and believe, it can achieve.”     “The first step to creating a goal is to figure out what you want. If you don’t know what you want, you don’t know what you need to achieve to get there,” writes Ashley Feinstein of Forbes magazine. She cites a study by Gail Matthews of Dominican University that proved scientifically that people who wrote down their goals accomplished significantly more than those who did now write them down. (Source: Ashley Feinstein, “Why You Should Be Writing Down Your Goals; April 8, 2014, Forbes)

Visualize, Visualize, Visualize

Conceiving your goals usually starts with closing your eyes and visualizing what you want to be doing in retirement. Hey, as soon as you collect that last paycheck from the company and leave the office for the last time, you will have that feeling of immense freedom that comes from realizing you can finally do whatever you want to do you’re your time. But if you don’t have anything in mind, the next wave of emotions that will come over you will be a feeling of being lost in time with no direction. That’s why writing down your vision now forces you to crystalize and fully understand just what it is you want your money to do, now that you are on your own time.

So, what is it? What do you see yourself doing more of? Is it traveling? Visiting relatives? Playing golf? Spending time with the grandchildren? Enjoying the beach? Turning your lifelong hobby into a side business?

“We intend to buy a motor home and spend two years visiting every national park in the country,” one couple said.

Not a bad idea. Did you know that anyone over the age of 62 can obtain a Senior Pass that will give them free admission to all National Parks and Federal Recreational Lands? Getting there is, of course, up to you.

Take it a step further. As you write down your specific goals for how you want to spend your retirement, write down the yearly costs involved with each activity. Begin putting money aside in advance so you can afford to accomplish it.

Have an Exit Strategy  

Whether we are in the stock market, or any financial vehicle, even real estate, we must have an exit strategy. Soon or later, during our lives, or after we are gone, we, or someone we leave behind, will withdraw the money we have put into those investments. Hopefully, that individual will be you. And hopefully, you will have locked in the gains you accrued in the stock market, or the real estate market. The only way to really lock in a gain in either of those two investment categories is to liquidate those investments. If you leave the money there, there is a chance the value of the investment could go down and you could lose.

The Smile That’s Not a Smile

If you had a graph that depicted the movement of the stock market between the years 2000 and 2010, and stood back and looked at the pattern it created, it would look like a great, big smile. I call it, “the smile that’s not a smile.”

They call it the “lost decade.” If you put an X at the starting value of the market in 2000, and put another X at the ending value in 2010, you would be at roughly the same spot. But if you connected the dots of every year in between, it will look like a smile. But there is nothing to be happy about, because, if you were in the market, you lost 10 years of your investing life where you earned zilch! When it comes to investing, getting back to even is not winning. Not only did you not earn a return on your investment, you didn’t have the money. It wasn’t there. If you were an investor during that time, you may remember how you felt – the despair caused by market fluctuations and the stomach ulcers the stress may have created. That’s not healthy living, now, is it?

 

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