By Kurt Wunderlich, CFA
People love life hacks. Everyone wants to know how they can do more with less. Hundreds of websites are devoted to scrimping and saving for people in their 20s, 30s, and 40s so they can leave their 9-to-5 job as soon as possible and hopefully live off passive income streams for their remaining years. Building the habit of paying yourself first and investing early is smart. Warren Buffett famously called compound interest the Eighth Wonder of the World, and the retirement planning space is full of great posters and diagrams showing the power of saving early and often.
We already know that there is no one-size-fits-all approach to investing. So, what if we took a similar approach to savings? Yes, we can agree that those who start saving earlier give their money more time to grow and increase their odds of having more financial flexibility later in life. Those who procrastinate on saving may have to sacrifice more in their later working years to prepare themselves for a successful retirement. The financial challenge we all face, then, is creating the right mix of living in the now and preparing for financial independence.
Rules of thumb exist as a starting point for a conversation, not as the end to one. Investing, saving, and spending are all personal decisions that should arise from who you are and your values. You may want to make your own deodorant to save $4 a month so you can travel the United States full time in an RV by 35. Or you may enjoy your career and one day want to own the family home where everyone comes to gather. The financial pie for these two scenarios is drastically different. But both can be “right” and even coexist. The key piece in each (or any) goal is a focus on aligning your finances to support your values.
To start, what is your top financial life goal? Your purpose drives the process, and your process drives the results. As James Clear says, “Every action you take is a vote for the person you wish to become.” Beginning with the end in mind – that is, your goal – allows you to visualize the life and financial outcomes you want. Now that you’ve visualized your future, what is the …….