by Karen Telleen-Lawton, Noozhawk Columnist (read the original in Noozhawk by clicking here)
I’ll wager an educated guess that if you’re in the majority of folks who have put off financial planning, a couple of reasons are to blame. You don’t like dealing with numbers, and/or you believe you’re already hopelessly behind. If either of these is true, I’d like to offer you some hope.
First, financial planning is more about life than numbers. A comprehensive plan examines your past, present and future attitudes toward money to help you match your finances with your needs and goals.
One succinct analysis of life-centered financial planning questions is formulated by financial advisors Steve Sanduski and Mitch Anthony, founders of a Midwest business called Return on Life Advisors. They encourage answering:
How did I arrive at my perspectives on money?
Am I managing my money in a way that is improving my life?
Am I financially prepared for life’s big transitions?
Pondering these questions takes some number crunching, but the resulting financials are in support of your life goals. For the vast majority of people, money is not the end goal, but rather life significance. You can make the biggest difference by being intentional, which requires making a plan.
A recent client experience taught me more about the significance of significance. In her late 70s, she wants to provide a generous gift to a relative. She has been careful with her money and, while not wealthy, has ensured she can be comfortable into her old age.
I admit, my first urge was to steer her from the gift, primarily because of the young relative’s circumstances. But as she shared more about her own history, I understood her passion and why a generous gift would be meaningful for her life.
In the end, I coached her to first set in place her formal retirement plan, to face potential glitches. Then she should feel free to proceed with her gift in manageable steps.
The other reason some avoid financial planning is that your hopelessness has induced a sort of brain-freeze. There are ways to get unstuck. One is to realize you’re not alone. The median working-age couple has only $5,000 saved for retirement, while the top 10 percent have saved a mere $274,000.
True, it’s not enough. But recall that you have been contributing to your retirement throughout your work life, with withholding contributions to Social Security and Medicare.
Very low-wage workers’ Social Security benefit can amount to almost 90 percent of their pay; the percentage reduces with higher pay and fewer years in the work force. Moreover, Medicare recipients are overwhelmingly satisfied with their coverage.
It’s up to us voters to keep it that way for our own senior-hood.
So, you have the beginnings of a nest egg. Adding significantly to the total means taking up a regular habit.
The Nobel Prize-winning ideas of behavioral economists have shown that nudging rather than self-flagellation helps us change behaviors. This means steps like asking your employer to deduct an increasingly large percentage from your paycheck, even above the deductible amount.
Some companies have doubled retirement plan participation by using nudges such as auto-enrollment, auto-escalation, and holding frequent retirement seminars.
If you’re self-employed, you can do yourself the same favors. Max out deductions into IRA-type accounts. Work with a financial advisor to align your goals and needs. Ask her to make sure you’re culling all the available savings opportunities.
There is hope in taking the first step. Choose hope by taking that step.
Karen Telleen-Lawton, Noozhawk Columnist
Karen Telleen-Lawton is an eco-writer, sharing information and insights about economics and ecology, finances and the environment. Having recently retired from financial planning and advising, she spends more time exploring the outdoors — and reading and writing about it. The opinions expressed are her own.