Change can be rough.  Maybe you’ve already experienced a job change or career change, planned or unplanned.  Or, perhaps, you’ve already experienced a major life event that will alter the course of the rest of your years.  Following these thoughts should serve as fundamental principles for those of us with more working years to accomplish than we’ve achieved.

1.  Money has a cost.

No, I don’t mean whether Priceline or Expedia is cheaper than going directly through Marriott or United Airlines.  I mean that fancy set of words “opportunity cost”.  Individuals and families, like companies, have to decide the opportunity cost of different activities.  Should a family of four pay the roughly $5,000 for a week-long vacation to Disney World, or invest it in a Roth IRA, or pay down student loans, credit cards, or other debts?  Before you make that decision, look at the true money cost of the decision.

I like how Shark Tank’s Kevin O’Leary, who calls himself “Mr. Wonderful”, thinks about his dollars.  He, in his mind, lines each dollar up like little soldiers to go to battle.  The soldiers are to bring back hostages, who will, in turn, go out and capture more hostages.  It’s a biting sense of humor, but he paints a vivid picture of getting money to work for you.  If you watch closely, he invests on the TV show in this manner, too.

*Quick note: Tax refund checks are generally NOT a good thing.  It means the government got to hold your money interest free from the time you paid the IRS until the time you deposited your refund check.  In O’Leary’s way of thinking, you had prisoners of war who just got released!  By the way, what DID you do with that refund check? 

2. Fancy Cars and Houses.

New, fancy cars and houses are fun.  I hope I’ve validated your feelings, because I share them.  I drive a car that is now 11 years old, but it runs like a top. I live in a neighborhood where a lot of my long time neighbors are building not just new and fancy, but HUGE houses.  After our devastation in Hurricane Harvey, they made the decisions to tear down and start over.  I’m rooting them onward!  We decided to not go that route; we’re remodeling.  At times, both decisions have felt very difficult, but then, I remember the above rule #1: Money has a cost, and I’m not ready for that expense. 

Please understand this is not a pleading for austerity.  Rather, I’m advocating the principle of good stewardship.  Part of good stewardship is enjoying the blessings you have.  It means that new car or house may not be appropriate now, but it may be later!

3. Unforgettable Experiences.

Every social survey article about defining the generations I read seems to point out that Gen X’ers spend their money on stuff, and Millennials spend their money on “experiences”.  Item #2 might resonate with the X’ers.  Millennials, this #3 is for you.

At the risk of mortally offending the Millennials, the 20 weekend vacations and 30 concerts/ballgames per year may be your “fancy car” equivalent.  Sorry.  To save space in this article, the stewardship principle applies here, too.

4. Insurance.

I regularly teach high school seniors, and, every year, the new batch of seniors think they’re bullet proof.  I’ve seen enough of their decisions (some quite funny, but that’s for a different article) lead to a need for insurance.  Enough about them.  Let’s get back to you.

I don’t particularly care to write the checks for the insurance, but I have had more than one time I’ve been grateful to have it.  Here is a list of what you should have:

  1. Health Insurance – Know what your current plan covers, and supplement if needed.
  2. Car Insurance – If you have a car, you must. It’s the law.
  3. Life Insurance – Even if you’re single, buy it.  It’s cheaper when you’re healthy and young.  Just do it.  We don’t sell insurance.  Find a reputable broker to find a policy that fits your overall needs for today and the future.
  4. Home/Renter’s Insurance – Another crucial one.  Get a competitive policy from a reputable provider.
  5. Flood Insurance – If you live in or around Houston like I do, this is a must.  Closing in on a year after Hurricane Harvey, I still find myself dismayed at the lack of homeowners (especially Millennials and X’ers) who didn’t have this, and have been financially wiped out.
  6. Disability Insurance – Most people forget this one.  Remember the high school seniors.  Don’t make the same mistake of thinking you’re bullet proof.

Your employer may provide supplemental or assistance with the above mentioned categories.  Make sure you know what they are.  (Stop reading for a moment and email your HR for a list of your benefits!)

5. Saving and Investing. 

I spend about 90% of my time working in this arena (some call it investment management), but the benefits of it are not fully realized unless an appropriate financial plan is developed and successfully executed.  If you feel like you are mired in debt, or don’t have your finances in order, read this other article The Twelve Step Program to Get Your Financial Life Back on Track

Back to saving and investing.  Many companies offer retirement programs such as 401(k), 403(b), 457, etc., and these are incredible opportunities to make your money work for you.  Ask your company about a matching program, and contribute at least the maximum match amount.  You need to view the company’s contributions as free, pre-tax money.  Because it is.  If you have the financial ability to max out your contributions, do it.

If you want an additional investment vehicle, consider the Roth IRA.  It differs from a 401(k)/Traditional IRA primarily in the area of taxes.  401(k)/Traditional IRA plans are funded with pre-tax dollars, so you must pay tax when you withdraw at retirement time.  You pay retirement income tax rate, which will likely be lower than when you were working at the height of your powerful career.  Huge tax benefit.  Roth IRA plans are different in that they are funded with taxed dollars.  The government only taxes your earnings once.  So here’s the beauty of the Roth IRA: you fund with taxed dollars, and the Roth IRA grows and compounds, and is withdrawn tax free!  Pretty cool, right?

Let us know if we can help you.

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