KJ: One of the things that’s easy to do when you’re young is to simply think about what tomorrow will bring and that you don’t need to make any changes to your lifestyle now. How many times have you done that with your weight and working out, with creating a budget and sticking to it, with planning for an important goal at work then actually achieving it? When you push these thoughts out of sight and out of mind, you often find that you stumble upon these lofty goals six months later and realize…”what happened?”
AJ: This is classic behavior for Kirby and me. We do really well at something for a period of time but then life takes over, other responsibilities, things we actually ENJOY doing, and we get distracted, off-track from what we set out to do. Totally normal behavior, really. It is extremely important to build upon those moments where you reset and rebalance your goals to help solidify the mindset that what we do today creates the future that we are striving for both financially and professionally.
Starting at the bottom: your lowest pay point
KJ: You just graduated from college, you just started your first “real” job, and the sky’s the limit from here. It’s an easy transition to our careers because when we’re young, we have a tendency to think that we’re at our lowest pay point in our career and that tomorrow’s income will help subsidize any lifestyle we have today. For many, we wind up thinking, “why save today, we’ll make enough tomorrow to compensate for any shortfall!” Then reality sets in. Regardless of how much you actually end up making, there’s always going to be a desire for more and a need to have a cushion when the unexpected occurs. In today’s world we’ve been trained to believe that Facebook executives making billions in a few years and other technology startups making money hand over fist is normal and you begin to believe there’s something out there for everyone that will make them a billionaire. We’re certainly not saying that’s impossible, we’re just formulating a back up plan. You know, just in case.
What Angela and I have learned quite well over the years is that tomorrow is by no means guaranteed, and you have to plan for the uncertainties that may come, but live on what you have today. Whether it be budgeting for our regular expenses, saving for an emergency fund, saving for new appliances (a much more entertaining goal than for an emergency fund I might add), you can’t build stability by always hoping that tomorrow will take care of the rest and that so long as you’re working you’ll always be climbing onward and upward with no end in sight to raises and bonuses. After all, the recent “Great Recession” has lessons for us all.
Planning for the hope of tomorrow’s income is dangerous
KJ: When you start planning for a pay increase, bonus, or other windfall, you fall victim to your circumstances, and you no longer have control of what you CAN do today. You often find that you plan less, care less, and think that all will be fine, so you end up in a worse situation than if you planned for the uncertain tomorrow.
AJ: This is really a matter of pacing yourself. Even Kirby and I find ourselves playing the “what if” game just to see what might happen if we had a little more we could spend or a little more we could put toward retirement. Possibility thinking is what we were raised to hope for and it can be an incredible way to stay motivated when you’re otherwise stuck in life. Possibility thinking is incredibly powerful, but try to balance that with the reality of what you’re currently earning to keep yourself in check.
KJ: If you save today to retire early, you have to imagine what you may need to get there. Many people suggest saving at least 10% of your income, but especially if you are in a position to increase your income from year-to-year, 10% savings today may not be sufficient to get you to a position where you can have enough assets to live on tomorrow’s income you might grow used to. That’s why I like to recommend that you find new ways to squeeze your budget and stretch your income time-after-time to live more with less, so you can see your savings outpace any potential income growth you may have. Even if your income is stagnant, there are lots of ways to creatively shrink your expenses which ultimately feels like doing more with less.
- What do you do to plan within your means?
What tools do you use to help you plan for the unexpected that may come?
Tell us about your struggles in planning for the uncertain future.
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