Why should I plan?

Financial planning isn't simply about socking away as much money as you can during your working years and then hoping that you don't run out in retirement. Rather, it provides a means to attain the things that are important to you in the present and throughout your life. Not too long ago, I read a quote that went something like this; "If you fail to make a plan, you'll be working for someone who has a plan for you." Now, if you're one of those few people who actually knew what they wanted early in life and then went for it, then this quote likely doesn't apply to you. For the rest of us, it rings true. If we take it a step further, we find that this message applies to many facets of our personal lives as well. While businesses spend countless hours and millions of dollars annually to find ways to get us to part with our money, most of us toil away at jobs we don't like to pay for things that we don't need and all the while wondering why we're unhappy. Happiness isn't found in the accumulation of stuff and at the whims of creditors. Rather it's found in taking control of your life and being responsible for your actions. Begin living your life on purpose. Develop a plan, and discover how rich and fulfilling life can be. In doing so, you'll stop working for creditors and begin working for yourself.

So, what wrong with making payments ?

Most of us are currently making payments on items for which we couldn't pay cash. So, what's wrong with making payments? For some of us nothing. But, for most us a lot! Here's the problem. Making payments has become a way of life for many Americans. Many are so mired in debt that it is robbing us of our financial peace. Now, my concern isn't about mortgages, rather it's about the average American's addiction to debt. Instead of asking how much something costs, we begin by asking what the payments will be. When I was a child in the 1970's, the extent of most peoples indebtedness was their mortgage. In the 1980's, as the price of auto's increased, financing became more common. Credit cards also began gaining in popularity since they made items that for most of us were unaffordable, affordable. We no longer had to delay our satisfaction!
Fast forward to 2008, it's now normal to have two car notes, a mortgage, a second mortgage or home equity loan, and several credit cards. Most households require two incomes just to stay ahead of the creditors! And, you'd better not be late on the payment or your rates will sky rocket. Many people believe that they are in so far over their heads that there's no way out. So, what are we to do? We've got to get back to money basics, which include spending less than you make, saving for emergencies, budgeting, and delaying gratification. If you're unsure of where to begin, here's the first step, "Stop Borrowing !"

So, how much should I be saving for retirement?

You're told that should be saving as much as you can for retirement. So, you contribute diligently to your employers retirement plan. Maybe you also maximize your annual IRA contribution, all in an attempt to hopefully have enough saved so that your money won't run out in your retirement. But how much will you need, really?
In order to develop an understanding you should first create a picture of what you want your retirement to look like. For some, retirement means travelling abroad and sampling exotic foods. For others it means being home more and spending time with the family. Obviously, our required nest eggs are as varied as our retirement dreams.
Once you've created your picture of retirement, ask yourself what it would cost annually in todays dollars and additionally, how many years you expect to live in retirement. Armed with this information, google "retirement calculators" and try your hand at a couple. You will likely have to supply the following figures; how much you have currently saved, how much you're contributing each month, and how many years you have left before you retire. The calculator will tell you if you are saving enough, and if not, how much more you should be saving monthly.
Try changing a few figures in your calculations. Try putting retirement off a couple of years, and/or change the monthly contribution amount.
While there are many additional factors to consider, this will give you a basic idea of where you're at on the retirement track. Hopefully you also discovered how making a few subtle changes can have a huge impact on whether or not you attain the retirement you'd envisioned.
In summary, this article has attempted to provide a basic understanding of how to determine and save for your desired nest egg. For some it will provide a wake up call, others will say it's too simplistic, and still others will say that the results are unrealistic. Whatever your reaction, I'm convinced that most of us are capable of creating the retirement of our dreams, but it comes at a price tag.
It might even mean delaying immediate gratification in this era where we've been conditioned to live for today.

The seeds of debt

As a newly wedded couple in 1984, one of the first goals of my wife Lisa and I was to build our credit. I can't remember when the seeds for debt had initially been planted, but the common theme amongst well intentioned friends and family was to build your credit so that you could purchase a home or car. So, there we were willing to enslave ourselves to anyone who'd offer us a line of credit. Five months into my four year Air Force commitment, Lisa and I had decided that we couldn't bear the separation and so decided to get married. Anyone who's been in the military will remember the predators lined up just outside the base gates waiting to get a slice of that guaranteed biweekly check paid to every soldier by the U.S. Government. These purveyors of debt include businesses offering payday loans, furniture rental, new cars etc.

Those first years of marriage were filled with financial missteps. Once the decision had been made to get married, I went to the mall and put an overpriced ring on lay-away to profess my love for Lisa. Still in technical school and living in the dorms on base, I was able to pay the ring off in just a couple of months. Paying for the ring had absorbed all of my salary and savings, so I took a pay advance to pay for our wedding. My future salary would be garnished for the next six months of our marriage until the loan was paid. I can remember sitting on the bed the night of our honeymoon opening the wedding cards to pay our remaining wedding expenses including the hotel. Two days after our wedding, Lisa and I drove to Omaha Nebraska in the Chevy Chevette, that had been given to her by her father, with all of our worldly possessions jammed in the back. We found a small apartment and paid our deposit with our remaining wedding funds. Less than a month into our marriage, the transmission failed on the chevette. Lisa's dad agreed to be a cosigner on a new car loan. We purchased our first car on a five year note at 15.75%, which was the prevailing rate back in the mid 80's. The service light went on several months after purchasing the car. I left the car at the dealer and received a call later that day. The car just needed a minor part. I assumed that everything was covered under warranty, so told them to go ahead and fix it. After work, a coworker drove me to pick up the car, I received a bill for $175. We called her dad, and again he came to our rescue wiring the money the next day. Amongst our many blunders, sticks out another instance.
We'd been watching a borrowed 12-inch black and white TV and decided that we needed a color set. We still hadn't saved any money, so again tried our luck at financing. We wrote a down payment check for about two hundred dollars with the assurance that the store would call us the next day to let us know if we'd been accepted for credit. The following day we were informed that we'd been denied and that our check would be mailed to us. Assuming this to be true, we added the money back into the account and began writing checks against the balance. A couple of days later, we began receiving notices for insufficient funds. It turns out that the check had been cashed. Five bounced checks and several days later, we were eventually able to get the issue resolved. We were indeed living the American Dream....

Living like there's no tomorrow...

Most of us baby boomers are living our lives without a plan. Our consumerism society has convinced us that as long as we can make the required minimum monthly payment, then we can "afford" and are deserving of, satisfying our every whim. Way back in the early 70's, before the proliferation of credit cards, the 2-car families, and Mcmansions people paid cash for nearly everything except for perhaps their homes. Most intact families had a stay-at-home mom, one paid for car, and a single television set. Today, certain that we'll be happy if we can just purchase that next gotta-have toy, we've stretched our finances to the limit and forsaken the future for our immediate gratification. Second mortgage anyone?

In the late 1990's, tired of living month-to-month and feeling like I was at the mercy of my creditors, I began a quest to educate myself and my family in the area of personal finance. As my knowledge increased, it became painfully evident that my wife and I would have to make some dramatic changes if we were to succeed in changing our family's course. Fast forward ten years. We now have minimal debt, better communication, and less stress in our marriage. The objective of this blog is to share our story and hopefully prompt you to share yours. Let's learn from each other...