Take control of your finances
The following was posted on the Rule Your Retirement discussion boards by a subscriber who has worked very hard and has taken control of his financial future. You may not agree with everything he says, but I hope you'll admire his resolve to have a plan for protecting himself and his family.
This is prompted by two emails I recently received, and by two conversations including one with a dear relative, and by the realization that I have to pack for another business trip. It is also prompted by the fact that I returned to Chicago only a few days ago and my spouse has now returned from Dallas, and I will soon be “on the road” again. I am becoming more and more aware that “Life is short” as the saying goes. Perhaps teenagers can afford to pretend that they will live forever. I will not, cannot, and I still have a lot to accomplish on my “to-do list of life”.
As for the relative referenced above, he is struggling, has continuing difficulties, has made a series of bad decisions spanning 6 years and has also had some misfortune, including timing issues related to the economy. As a result, he has spent more than a few nights in a PADs shelter this year. He has been optimistic throughout and insists that his “modi operandi” is viable and that he will turn things around. That may occur in 2013, but for the immediate future I beg to differ with him, have repeatedly told him so, and have made suggestions. He persists in his path. This is an individual who is educated, very smart and for many years made well into 6 figures a year, each and every year. It is difficult to watch him struggle, persist in his path and to resist change.
We are now about 4 years into a very nasty recession. I use June 2006 as the start date because that is the date that real estate prices began to fall and the economy began to contract. That is also the time at which I first experienced significant change in the business climate.
My spouse and I now know of 7 families of immediate acquaintance who are experiencing acute financial difficulties. By “acute” I mean forced short sale of a home or condo, unemployment for a period exceeding 12 months, etc. We also know of 6 additional families who are experiencing financial difficulties which are also severe, but not quite as distressed. Those families have acknowledged that they are in a “negative cash flow” situation. Which bluntly means, they are living beyond their means and headed for a financial cliff, and a day of reckoning.
To some extent our lives and our life styles are a personal decision on the part of us all. But not entirely. My relative felt he could “beat the odds.” He had a strategy and a plan. It was flawed but possibly capable of success. We discussed this and I told of him of what I perceived were shortcomings. He persisted and he has failed.
I am unwilling to fail. To that extent I will do whatever it takes, and will make and have made, great sacrifices. My spouse will possibly be on this planet for another 40 years. It is essential that we have a financial plan in place to accommodate that life span. To do otherwise is irresponsible on my part, on her part, and dishonors the relationship.
My spouse and I have made a conscious decision to attempt to live within our means. By that, I mean not to spend any more in a calendar year than our net incomes (wages after taxes, rental income, dividends and interest, etc.), and to also save a reasonable amount for retirement and to make concrete plans for that retirement. This requires some sacrifice on both of our parts and also some trade-offs in life style. It also requires decisions that are not popular. We will not and cannot attend every family event or function.
To be blunt, we have not the financial means to do so. Perhaps you do and if so, all I can say is “good for you.”
Let me also state, that that you are free to make any request. However, in any request or negotiation there are three possible responses: accept, counter-offer or decline. I am free to choose any of those responses, but I prefer to counter-offer rather than to decline.
On a personal level, this year we did not meet our financial goals, and had to dip into savings, “but we had a lot of fun and one hell of a party”. Frankly, I am concerned by the possibility of another 4 to 6 years of malaise in this economy, and the impact on those around us. I now wonder and question “are people prepared for this” and “how will people survive?” By survival, I mean can we all maintain our lifestyle, our relationships and our sanity and simultaneously meet our promises and commitments?
I made the decision last year to honor or attempt to honor, requests or invitations that are serious. I cannot honor all requests and invitations and keep my commitments. Those commitments have also included an increased level of “giving” in various forms, including consistent gifting to two local churches and several other charities and food pantries, and to distressed family members.
This year, the last of three and one-half college loans that I paid for, were retired. None of these were mine, by the way! The good news: I’m no longer under that specific “financial burden.” So should I now pursue an advanced degree? I think not. I am sufficiently educated to accomplish whatever it is I intend to in this life. Don’t misunderstand. As one who has been committed and lived a life of “continuous improvement” I have no intention of atrophy at this point.
I have the benefit of having struggled for years after a very bad divorce and some very difficult economic times. Do any of you recall the recession of 1981-1984? I actually started and grew a business in the middle of that recession. Just prior to that, I went into the office each week and wondered if each Friday would be my last. That went on in 1977-1978 and prompted me to start my first business. If I was to be “fodder for the cannons” I decided I would choose my own destiny. Business worked but marriage didn’t and after my divorce, I had a maximum of $75 per month for all expenses after rent and electricity. I’ll let you think about what that “disposable” monthly amount of money would mean to your lifestyle. For me, at that time I couldn’t afford a monthly Dunkin’ Donuts, and getting a haircut was a major economic decision!
As a consequence of that experience and the fond memories it includes, the nearly 20 years of “lost life” including the nearly 10 years it took to dig out of that hole, I have vowed never, and I mean NEVER to allow myself to be in that situation ever again. As a result, I am the “hard ass” in my relationship with many people and that includes with my spouse. She knew that when we married. What you see is what you get, and I have been very transparent with her. That is, however, no excuse for any irresponsibility on my part.
I hope that each of you is taking steps to protect your way of life. I suggest you consider where this economy is today and to project that into the future for another four or more years. What would that economic reality mean to you and your loved ones? Do you have a plan in place? Is your plan and lifestyle compatible with that possible reality?
I realize you may not agree with my prognosis. You may prefer to listen to optimists and certain politicians. I suggest that you consider the risk and risk to your family and your relationships that you are taking, should you be incorrect. This is neither about being “wrong” or being “right”. It’s about succeeding and honoring agreements and commitments. I am not willing to take the risk, or to say it another way, there are some risks that are worth taking but this is not one of them. To anyone who thinks they can “beat the odds” I suggest you consider how well you have done in the past four years, since this economic malaise began. Then consider that things might actually get worse.
I am personally very fortunate. I have a loving, compassionate, hard working and successful spouse. We are both like the tortoises in a country of wild hares. My business remains at levels that are adequate. That permits me to flush a certain amount of money each and every year on lifestyle choices. However, I consider certain things to be extraordinary risk taking at this time. Mortgaging ones future is certainly one of them. Five years ago, I might have thought differently, but this is “here and now”. For the Boomers, be prepared for a retirement below that of current seniors. For the GENX group, I suggest you save more as your life style will be significantly less than that of those today in retirement. For GENY, if you don’t save 10 to 15% of your wages for retirement, be prepared to starve.
To use that old Hells Angels’ quote “Life is a bitch and then you die”. Or not, but the choice is ours. If you want to be in a responsible conversation about this, let me know. However, if you want to tell me that I am too pessimistic, etc., then don’t bother. I decided, in 2006 that the economy was headed for disaster and took appropriate steps. If I hadn’t, well, I’d be in the s***hole today. So save your optimism for other gamblers.