I’ve written about financial security and self-awareness before. It shouldn’t be surprising to those who know about my thirty-year career in financial planning that I enjoy writing about this topic. This blog will focus more on the importance of strong self-awareness as the bedrock of successful financial management.
85 million baby boomers (ages 55 -73) are either at retirement age or fast approaching it. Because of the rapid increase in life expectancy in the last half century and the income stagnation baby boomers have struggled with from 1990 to present, almost 65 million baby boomers express concern that they won’t be able to retire at normal retirement age, and 55 million are fearful they will NEVER be able to fully retire. You can readily see there is plenty of stress among baby boomers facing an uncertain retirement.
Millennials (ages 20 – 38) face a precarious financial future as well, in that:
- They start their careers with heavy debt loads baby boomers didn’t face.
- The job market today generally doesn’t offer the same pay levels or upward mobility the baby boomers enjoyed for much of their careers.
- Millennials face job competition from the baby boomers who are holding on to jobs beyond normal retirement age.
- Millennials don’t display the same patience and determination regarding career advancement as previous generations.
Baby boomers and millennials both deal with income levels that are less generous and more stagnant than in previous economic cycles. Employer retirement benefits have been cut drastically since the mid-1980’s, replacing generous employer-paid fixed benefit pension plans with employee-funded 401K plans that place the greatest funding burden on employees for retirement benefits. Stalled wage growth over the last three decades has exacerbated the retirement funding crisis for the rank and file employees who can’t afford to fund retirement savings accounts sufficiently to assure adequate retirement security.
It is here where the current large and growing income disparity between the top income earners and middle to lower income earners is having the most severe impact on the financial well-being of much of our working population. It is also fair to mention that as a society we don’t spend our national wealth as prudently as we could.
While baby boomers and millennials face real career and financial challenges, there are steps each one of us can take to improve our financial situation now and increase the likelihood of our living a rich and enjoyable retirement. These suggestions include the most important steps you can take to gain the most secure financial footing, but are just the start-point:
- Regardless of your stage in life, set written goals for this year, five years, ten years and twenty years down the road. The more challenging your financial situation, the more detailed your goals should be. Make sure your goals are realistic for your circumstances.
- Communicate with your spouse regularly about financial goals and budgets so that both of you are on the same page.
- Get all the help you can afford from people who have proven to be successful in helping others and in handling their own financial planning.
- Do your very best to pay off debt, avoid taking on new debt, and adding to
savings. Save something each month even when paying off larger debt loads. - Enroll in your company’s retirement plan and contribute as much as possible, especially if your company makes matching contributions. If your company doesn’t have a plan, contribute to an IRA. Get help with educating yourself about details of the plan. I know one woman who was sure she would only be teaching for a year or two, so she never enrolled in the teacher’s retirement plan. She taught for 38 years, and never enrolled in all those years. That cost her $40,000 a year in retirement pension at age 65. Devastating!
- Be aware that Social Security benefits over the coming years will change, and will likely shrink, especially if you are more than 15 years away from Social Security eligibility. Plan for Social Security benefits in retirement, but annually check regarding benefits changes.
- Keep investing in yourself, in terms of increasing your knowledge and skills through out your life. Take advantage of every relevant training program available through your employer.
- Know Yourself! This means intentionally increasing your self-awareness, both in your career and in your personal life. Know your values, know your goals, foster solid relationships, take good care of your health, continue to develop your spiritual life.
- The better you know yourself, the less impulse or wasteful spending you are likely to engage in. Strong values and goals will be helpful as you try to create and stick to a spending and savings plan.
- You are more likely to resist the type of profligate spending that is ruinous to long term financial security. People who look for happiness “out there in the world” waste massive sums in a futile attempt to purchase it. Happiness is an “internal sense of peace and affluence” that doesn’t wax or wane with changes in outer circumstances.
In our society there are so many free or nearly free activities that you can enjoy by yourself or with friends and family. If there is a university near you, you can find interesting programs and exhibits almost weekly at little cost.- Foster solid relationships through work, church activities, social clubs, etc. A study by Harvard University of older people showed that long term close relationships were key to a happy, healthy and successful life. Connection is the very breath of life.
As you face retirement, I strongly urge you not to try and “go it alone” in climbing that mountain. There are too many valuable people and programs that will assist you on your journey toward satisfaction and happiness.
Tom Searcy, BCC
Spirit of Eagles
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