I'm not going to make ANY changesSubmitted by Financial Planning Solutions, LLC on August 17th, 2017
A few weeks ago, I was referred to a couple that came in for an initial consultation.
These initial meetings are a great way to get to know each other and helps me learn how I might be able to help someone. I don't ask folks to bring in statements, tax returns, budget, or anything thing else related to their financial picture as this can distract us from discussing their goals.
"Steve*" and "Julie*" were pretty organized and had binders of all sorts of stuff. Steve seemed really concerned with where their money went each month. (A common concern with many). He wanted me to take a peek at his finances so I did.
What was odd at first glance, was he consistently earned in excess of 300K a year. I then saw their expense sheet and then it became clear. Some items stuck out:
- Annual vacations - $30,000
- Annual car lease payments (Three cars) - $21,000
- Recreation (wasn't sure what this consisted of) - $26,000
- Credit cards - $24,000
When I started to question some of the expenses for clarification, he responded with "I'm not going to make ANY changes". He actually joked and said, "If you have a magic wand that would be good".
He further mentioned that he worked hard and deserved nice vacations, nice cars, and nice "things". None of which I could argue with. I just feel having a good comprehensive plan makes sense so other important goals can be met.
Julie was more concerned that very little money was saved toward their kid's college expenses or retirement. In fact, other than a small balance in Steve's workplace retirement plan, they really didn't have any savings whatsoever.
Now some of you reading this may think, "If I were making 300K a year, I'd have a hell of a lot of money saved".
What I have found over the last 25 + years is that many times, when one's income increases, their lifestyle costs can exceed their actual income.
And as far as I know, there are really only two ways to live within one's means. Spend less or earn more. In Steve's case, I don't think earning more would solve the problem. Not over the long term anyway.
Since Steve seemed unwilling to cut back on the non-essential expenses, there wasn't much I could offer in that meeting. I did offer to provide them with books or a referral to someone that helps people with over spending.
The bottom line is, there are few that can have everything they want (regardless of income). We need to prioritize. For example, they were leasing three cars but only two people in the house were old enough to drive and you can only drive one car at a time.
One has to be open minded to compromise. Whether it is a relationship, money, or your job.
*Names have been changed
We are here to help.
All the best.
Rick Fingerman, CFP®, CDFA®, CCFS®
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