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One Marshmallow or Two?

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A decades-long study has been conducted with children using marshmallows to determine their ability to make long-term decisions. The experiment is simple. Children are presented with a marshmallow; the person conducting the experiment tells the children they can eat the marshmallow now, or if the child waits 15 minutes before eating the marshmallow, the child will be presented with a second marshmallow. The child has to decide if it is worth waiting the grueling 15 minutes before eating the marshmallow in order to have two marshmallows. The study tracks the percentage of children who have self-control and long-term thinking capabilities to forgo immediate gratification for a larger reward in the future.

What if you were offered $10,000 today that you could spend as soon as you want, but if you waited 30 years to spend the money, you would be given $1,000,000? This is a choice you make when you save for your retirement. Thirty years is a lot longer to wait than the 15 minutes for the marshmallow, but the requirement for long-term thinking is still needed to end up with the better outcome.

As a financial planner, one of the best parts of my job is watching the families I take care of enjoying their life after work. The stories about the trips they take, or seeing them spend their winters in Florida, or the joy they have when they talk about not having to wake up early on Monday mornings to drive to work – this drives me to help more families reach this mountain top. But the reality is, this dream was not accomplished overnight. It took years of sacrifice, discipline, and patience to get to the point where they could officially leave the workforce.

Saving for retirement is not rocket science. What I mean to say is that you do not need a degree in finance or a deep understanding of the stock market to have success in the stock market. So why don’t more people retire with more money in their investments?

Because saving for retirement requires the discipline to live on less than you make. It requires saying no to newer vehicles or saying no to expensive vacations. It requires paying attention to the dollars that come in and the dollars that go out. This is not difficult in an academic sense, but it is very difficult in a behavioral sense.

Popular culture pushes all of us towards instant gratification. We live in a consumer-driven economy. Keeping up with the Jones’s is not a new phenomenon, but it is nevertheless more prevalent with the addition of social media that floods our feeds with images of families taking big trips or buying new homes. We are constantly being told to eat the marshmallow.

Your life after work starts with a vision. This vision provides a focus point, and it reminds you when you add money to your investments, rather than adding money to your standard of living, that waiting for two marshmallows will be worth it.

Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.

Create New Habits Instead of Making Resolutions This New Year’s

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The annual goal setting has begun! Just about everyone seems to make a New Year’s resolution. To not have one is an acceptable answer especially knowing most fail in the first 20 days of January. Health clubs thrive on sales of people who never attend and countless web coaches offer their time and material to those with the best of intentions. Change is hard. My friend Ben Hardy who wrote the bestselling book Will Power Doesn’t Work will tell you that change by itself is almost impossible.

We have triggers that drive most of our actions. Think about when you are most likely to do something that you wish you didn’t do. For most of us, that bad decision comes at a certain location, time or during a particular emotion. Being aware of your environment can help keep you away from troublesome actions.

Good Habits and Bad Habits

There are good habits like brushing your teeth and there are bad habits like excessive television viewing or social media addictions. Most of these habits are triggered by your environment according to Hardy.

Other habit experts say that our bad times spring from periods where we are hungry, angry, lonely or tired (HALT). They use the expression HALT as a code word to let themselves know they are entering a potentially hazardous state.

Not all habits are bad and this is important for your financial future. You can control your triggers to a large degree but you can also build good habits and shape good environments. Thanks to a set of marvelous coaches and friends, I will share with you some of the best habits from a financial perspective I have come across.

One friend uses credit cards in what he deems an irresponsible manner. His objective or habit is to intentionally make a deposit for a certain sum into his savings account every time he uses the card. His theory is he will spend hard cold cash less than using the plastic even though he pays them off every month.

Another friend looks at his investment statement too often examining the balance more than the allocation of his portfolio.  He is committing to spending 15 minutes examining a particular holding every time he glances at his phone for his balance. This is not to suggest that is a good idea but it is his intentional new habit.

One friend has a strict budget and this habit makes great sense to me. Whatever her percentage increase is in her budget, she increases in her savings. In other words, if her budget goes up by 5%, she increases what she is saving in her 401k by 5% more. Note that is not an additional 5%! The point being is that she is trying to track inflation as it relates to her family.

New Year’s resolutions to change are fine but an intentional new habit creation is more important long term than a set objective to attempt to achieve. Happy New Year and best of luck in shaping the new you!

Happy New Year

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

When Is The “Right” Time to Retire?

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Who doesn’t want to retire? More people than you may think, including myself. The rational and reasons for continuing to work come from the obvious “I love what I do” to “What would I do?” Our experience would suggest there is also a large contingency that is simply unwilling to spend down their life savings.

Delaying retirement on your terms is fine if that floats your boat.  However, delaying leaving your job because of financial challenges can bring on a host of unexpected challenges. Murphy’s Law seems to raise its head when the worst possible thing that can happen not only happens but occurs at the worst possible time. You suddenly need resources that you simply don’t have.

One challenge is losing your job when you intended to keep working.  This can occur due to a variety of reasons including economic downturns or because of your own health.  In either case, you were counting on an income stream that can suddenly disappear.

Working later than expected can also cause your Medicare Part B premiums to possibly be higher depending on the income you are earning. Like all things, one decision – delaying retirement in this case – can have multiple impacts across your financial landscape.

You can put off Social Security until age 70 if you so desire.  For many Americans that would be the wise choice but each of our circumstances is unique. The Social Security Administration tells us most people opt for a check earlier than wait for full retirement age let alone delay receiving benefits beyond their 70th birthday.

Even if you are working at age 70.5, you will still have to pull your required minimum distributions (RMD’s) from your IRA accounts. The more you make the higher the tax rate can be so RMD’s, Social Security and your working income can add up quickly, driving you to a higher taxation percentage. Side note: This is not true in the case of 401(k) plans where, assuming you own less than 5% of the company, you can delay RMD’s while you are actively employed.

There is also a challenge when spouses with gaps in their ages get married.  Often times one spouse retires sooner than expected harming their future social security payments in order to enjoy retirement with their older spouse. The older spouse delays helping their payments rise.

The big challenge for many families is “What would I do?” Individuals who love their occupation without interests and hobbies struggle to fill their week. This can lead to boredom and some social scientists argue even bring on early death.

Waiting to retire or delaying the decision is an awesome way to increase your account value and decrease the amount necessary to fund a successful retirement.  The longer you wait, the fewer years you will have in retirement lowering the amount needed as well as the impacts of inflation. This is not the right choice for everyone, but delaying is an option with side benefits.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

Seriously…how much should I be saving?

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Investing for your retirement can seem like a giant in your life. How much money will I need? When will I be able to retire? How much do I need to save today in order to have enough when it’s time for me to retire? But saving today can make a huge impact on your financial future, no matter how small the investment.

Shift Your Mindset

The first obstacle to overcome in saving is your mindset. Viewing saving as an opportunity rather than a sacrifice creates a positive attitude towards saving. This helps you to increase your savings because the long-term effects are more desirable than the short-term satisfaction you’d get from spending that money today. It’s hard to save, but it gets easier. The more you save, and the more you see the amount of your savings accumulate, the easier it will be to continue saving.

Start Today

There’s no better time to start than now — don’t put off until tomorrow what you can do today. Even if you start small, you will reap the benefits in the future. Start with $5 a day. It may seem daunting and it may not be possible for everyone, but if you are able, it is so worth it. $5 a day will add up to $1,825 over the course of a year! That’s almost $2,000! In 5 years, that $5 a day will be $9,125!

Does $5 a day sound like a lot to you? Well, the US Census Bureau states that the average annual salary in the United States is $35,000. That would make $5 a day only 5% of your income. It’s just enough to jump-start your savings without you feeling a deep loss. Look for unnecessary spending in your day-to-day and instead put it in your savings. Lottery tickets alone cost average Americans $800 per year!

3 Ways to Save More

Overcoming a negative mentality and procrastination alone can positively impact your financial future, but it’s not the only thing you can do. There are three simple lifestyle changes you can make that will help create a healthier financial situation in your life, as well as a happier you!

1.Cut back.

Being a savvy saver and an expert couponer will help save you money, but think about the things you can completely cut out. Many Americans live beyond their means, putting value in materialistic things. You know that saying, “money can’t buy happiness”? It’s not too far-fetched! Creating balance in your life, between saving and spending, is healthy. Consider the ways you could save rather than spend. For instance, you could choose to rent an $800 a month apartment, rather than a $1,500 a month apartment. That $700 a month that you save by renting a smaller apartment could be put to better use by investing it! Years later, that $700 will multiply and eventually turn into $2,500 or more.

2. Make more money & invest the increases.

Saving money and being frugal will always be wise decisions financially, but ultimately, the best way to build wealth is to make more money! If you make more money, you can invest more money. You might ask: How can I make more money? There’s plenty of ways, but the easiest would be to start a side hustle or get a raise! This may not be an option for everyone, but it’s something to consider! When you get a raise, you should invest 100% of it, and if you can’t do that, invest 75%, or even 50%! Living on your current income for as long as you can and investing those bonuses will put you ahead. Also, you can increase your 401(k) contributions when you get a raise to further build wealth.

3. Do both: spend less & make more!

What could be better than spending less and making more? Well, doing both, of course!! With this combination, the possibilities are endless. The key is to always save the difference.

Your financial journey is what you make it. Start preparing for your life after work now.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

6.9.18 Marrying Young, Debt vs. Saving, and Life Insurance

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Welcome to this week's Consider This with Big Joe Clark radio show, hosted by Joe Clark, CFP. This episode originally aired on June 9, 2018. To find our podcast, check out Consider This Program.

In this episode you will find information about:

Marrying Young, Debt vs. Saving, and Life Insurance

Questions or comments about this episode, please click here.

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