Monthly Archives: February 2011

Taking Your Financial Security Seriously

What is it about your finances and financial security that makes you think it’s okay to put them on the back burner?  Why is it that “finances” becomes a dirty word and “financial security” lands on the bottom of your list of priorities?

Interesting.

Let’s look at how we structure our priorities.

We’re incredibly diligent when it comes to doing the grocery shopping.  The minute we start running out of things, we’re already trying to figure out when we’ll stop at the store to stock up.  Triggered by what?  Popcorn?

And the minute our hair gets a little long, or our roots start to show, we find the time and money to have it cut and colored.  Regardless of the cost.

Then we have our iPads.  Just the rumor of improvements in an iPad 2 and suddenly we don’t love our existing version anymore.  And, trust me, we’ll find the money in order to stay on the bleeding edge of technology.

All these things are in the present, so we’re obviously present-focused.  (Besides, the past is what we work actively to forget … except for those niggling memories we use to beat ourselves up at night.  And the future?  What’s that?)

I know that popular modern authors like Eckhart Tolle harp on “staying in the present.”  Marianne Williamson feels the same and even complains that:

  • “Although the past is over and the future is never quite here, our minds are usually so involved with one or both of them that the present serves very little function except to form a bridge between the two.”  (From the July 2000 issue of O, The Oprah Magazine)

That’s all well and good in a metaphysical way.  According to popular quantum physics, where all things are happening concurrently and not consecutively, living solely in the present is wonderful.  However, for the less enlightened among us, the absence of concern over anything beyond today is going to make the rest of our day-after-tomorrows pretty grim.

When it comes to finances, the future comes across as almost radioactive.  Too many people have fallen for Madison Avenue’s mantra of the importance of “now” … the importance of having and being and doing today … to the detriment of your financial well-being when you are no longer willing (or able) to earn.

In order to understand why we don’t apply the same discipline to our money that we show our groceries, haircuts, and iPads, let’s look at our priorities where we earn our money.

Our Priorities Related to Our Work

We get up in time to make it to work whatever time we’re supposed to be there, whether we like it or not.  If we have jobs, there are rules we need to follow.  Okay, maybe we follow them because they’re the only way we’ll be paid the money we need to pay for our groceries, haircuts, and gadgets.  And this attitude applies to entry-level workers as well as corporate big-wigs.  (Their toys are just bigger.)

In the case of self-employed entrepreneurs, in that case the discipline has to come from the gut, because there’s no one saying what time work starts or stops.  And many entrepreneurs put in unbelievably long hours.  They are diligent about paying employees and vendors.  Government withholdings and other fees are paid religiously.  Their books are kept impeccably.  And they pay themselves enough for the groceries, haircuts, and gadgets.

But where is the automatic savings plan on the part of the employee, or the contributions to 401(k)s that max out employer matching funds, or structured SEP-IRA pension plans for the self-employed and their employees?

To be fair, it’s not as if no one saves and invests.   But the percentage of people who do not is staggering.  And the question is:  why?

Maybe because we’re so rooted in today, we don’t allow the inevitable reality of our later years to take on their full dimension.  They remain in muted grays while the present is seen in Technicolor.

And maybe we don’t internalize what the money we do spend represents.  Maybe we’d spend it more conscientiously if we looked closer at what it took to earn it.  Yearly or monthly incomes are too vague.  We need to put things in terms of hours.

What Is Our Work Worth?

Say you’re married and earning twice the median household income in the U.S.($46,000), or $92,000.  Say you are lucky enough to live in a state with no income tax, like Florida or Texas (and not New York where you’re soaked for state and city taxes as well).  After Federal Withholding, Social Security, and Medicare, your $7,666.66 monthly paycheck nets you about $5,750.  If you’re working the typical 50 hours a week most people put in today, you will have $28.75 for each hour you work.

If you start looking at your mortgage or rent in terms of how many hours of your work are needed to pay it, it might be a wake-up call for you.  If you then look at the work required in order to enjoy the budget-less grocery cart, or that haircut or electronic gadget, you might start respecting your money a bit more.

And once you start relating your expenditures to the effort you put out to pay for them, you might even recognize that one day you won’t be able to work as hard, or work at all.  At that point, you’ll wish you had spaced out your haircuts further apart and passed on the iPad 2.

An additional smokescreen is our extensive use of plastic credit cards and online direct payments.  It creates one more disconnect between how we spend our money and what it represents in terms of sweat off our brow.

Between our focus on instant gratification, our inability to see beyond tomorrow, and our desensitized view towards money, financial security appears more and more remote.

It is only by taking a critical look at our daily lives and being willing to dig into the “whys” of our behaviors that a good number of us will live out our later years as a time of personal exploration, recreation, and well-deserved fulfillment.

What are you willing to do?

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