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What Every Investor Should Know About Planning And Saving For Retirement
Today I want to talk about Why Budgets Fail.
If you’ve ever tried to go on a budget, you may have experienced some struggles with trying to stick with that budget. I oftentimes make the analogy that budgets are lot like dieting. Both require a tremendous amount of willpower and discipline to stay on a diet or to stay focused on your budget.
One of my favorite author is a man by the name of Tim Ferriss, maybe you’ve heard of him. He’s written several best-selling books. His first book was The Four Hour Workweek, but he also wrote a book about dieting called The Four Hour Body. And what Tim talks about in that book is he talks about planning ahead into having a cheat day. So he says, basically, most people that go on a diet are eventually going to have a breakdown at some point where they just can’t take it anymore and they’re going to go for the box of cookies or the ice cream or some kind of a cheat thing. And he says to plan it out in advance and he says basically if you can stick to your diet six days a week, stay very disciplined, but allow yourself one day a week to basically splurge and kinda do whatever you want, it’ll keep you focused on sticking with that.
I tried to think about that a little bit in terms of how we can relate that to sticking with a budget. And so one of the things that I have thought on is to try to make it as automatic as possible. So what we want to do is we want to kind of remove the willpower issue with sticking with a budget and try to make it as automatic as we can. So a couple ways we can do that, number one is that if we maybe have a retirement plan through work, like a 401k plan, you can automatically sign up for that and have maybe 10% or 15% of your income going directly into that retirement account. Especially if you have a match through your 401k plan, that makes it all the better to at least make sure you’re taking advantage of that match.
You may want to save some money outside of retirement accounts or maybe you want to pay down some bills or some debt that you have. Well, you can make that automatic as well, so as the money comes into your maybe primary checking account, as an example, every time that pay period hits, you can have money automatically going into another account or have it automatically paying towards a credit card bill that you have. And make that as automatic as possible so you don’t really have to think about it, that that money is just coming right out of your account before you even get a chance to see that.
After doing that, after having some money maybe going into a retirement plan through work and having some money going into an emergency fund or paying down that debt, now if there’s any money that’s left over at the end of the month, now you can take that money and kinda do whatever you want. You can splurge a little bit, as long as all of your other bills are taken care of. And it’s that kinda that cheat day for your money. So, if you’ve ever gone out and made a purchase and you felt guilty about making that purchase, most of the time, I think that guilt comes from the fact that you think that you should really be doing something different with that money, you think that you should be paying down that bill or you should be putting that money into your retirement account. So, by planning that in advance, and having that money left over, can kinda give you that freedom, mentally, to go out and maybe have that splurge or that cheat day, buy the thing that you want and actually feel good about doing that.
What I Do
I help individuals make the transition from working to retirement.
As you approach retirement you will be making some of the most important financial decisions of your life. Most of these decisions don’t get a do-over, once you’ve made them your stuck.
My goal is to help you get the most out of your retirement resources. I do this by coordinating and optimizing what I call the 7 Core Elements of Retirement Planning.
It all starts with a plan!
We use advanced financial planning software to help you understand your retirement cash flow so you know where the gaps are.
Understanding your retirement gap is the foundation to getting the most out out of your retirement resources and avoiding costly mistakes.