As originally appeared in The Jerusalem Post on Thursday, December 7, 2016
I need to get this off my chest. I am sick and tired of listening to people complain about how hard it is to make ends meet, let alone save for the future. Yes life is hard, but complaining doesn’t change anything. Usually when I help out those in debt, they always end up justifying why they needed to make large purchases, even though they have no money. There is no magical potion needed to achieve financial security. What is needed is to make smart financial decisions.
So you need a car? You make $50,000 a year are married and have three children. You will be counseled by friends who will tell you to get a newish minivan. After all you can borrow some money to pay for it and it’s just great to own; kids will have space, you can drive carpool and there is always a demand in the second hand market so you can sell it and get most of your money back. Sounds like a good idea right? Wrong! How on earth can someone who makes $50,000 a year spend $35,000 on a car? Stop justifying the purchase with all these reasons. If you can’t afford it don’t buy it. It’s that simple. How many people do you know that became wealthy by taking on consumer debt?
How spoiled as a society have we become when we think that we are entitled to anything we want, and if the government won’t give it to us for “free”, Visa and MasterCard will take care of it. As former US president Calvin Coolidge said, “There is no dignity quite so impressive, and no one independence quite so important, as living within your means.”
As Ben Zoma says in Ethics of the Fathers, “Who is rich? One who is satisfied with his lot.”
So often when I meet with newlyweds they start telling me all the things they “need”. Hello? If you are still both studying and parental support accounts for 80% of your monthly income, you don’t “need” much of anything. You need to finish school, start working and start paying your own way.
If you are newly married and work, how about sitting down and discussing your financial goals and then create a plan to achieve them, as opposed to spending every last penny, on entertainment, furniture and the dreaded aforementioned car.
As Ben Zoma says in Ethics of the Fathers, “Who is rich? One who is satisfied with his lot.” Wealthy people tend to have a similar approach to their money. I know some cynics out their will say something like, “They grew up rich and are used to a different standard of living than most of us, so this is irrelevant”. Well interestingly enough, I recently heard that more than 90% of millionaires are self made. They worked hard and saved.
A recent survey of nearly 700 high net-worth individuals by US Trust showed that they all have a lot in common vis-a-vis their financial management. It’s very important to plan for the long-term even at the expense of some current pleasure. Over 80% of these high-net worth investors said that investing in long-term goals is more important than funding current wants and needs. You need to pay yourself first and make saving a priority. If you spend first and save second, you will find out that there is nothing left to save!
They buy good, quality investments and hold them for a very long time. I know it’s boring, but it’s the tried and true way of building wealth. They buy real estate and invest in the stock market. They create an asset-allocation model, and stick to it, updating it from time to time as their goals and needs change.
There is no reason that you can’t be successful financially. All it takes is discipline in saving money and only buying what you can afford and truly need.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email firstname.lastname@example.org.