Expectations

[Dave McClung]

I am a member of USAA mutual insurance company. It is a very large association that serves military and former military families. This year, they did a "Money Snapshot Survey" of Employed U.S. adults which was conducted by Harris Interactive.

They found that 51% of the adults who responded have a goal of saving $1,000,000 or more before retirement. (1 in 125 Americans are millionaires.)

They found that 74% have less than $50,000 saved.

They found that 30% have nothing saved.

Could this wide difference between goals and actual achievement be one of the issues that is creating negative attitudes in our society?

Which should people change? Should they reduce their goals or increase their savings? Obviously, USAA is encouraging people to save more, but I wonder if part of the problem isn't unrealistic expectations.

In a different USAA survey of teens, they found that nearly 2/3 of teens expect to be millionaires in their 40's or younger. USAA concluded from the survey that parents need to discuss money matters with their children more.

My own idea, after reading the report of both surveys, is that many young parents have unrealistic views of their future earnings and are passing those unrealistic views on to their children. Maybe it is time to lower expectations.

[Jim Franklin]

Many teens focus on the entertainers who have become wealthy and believe they can do the same because they see it as being so easy. "Pie in the sky" wishes-expectations can really be a downer when those same young people pass up educational opportunities and fail to reach those expectations and become depressed over being "such failures." I think a lot of teen suicides are over just these phases of these young peoples' lives. A lot of 20 and 30 somethings are doing a lot better than I did for I was 52 before I broke over the $10,000/year income level as a suit salesman on commission at JCPENNEY which had nothing to do with my academic preparation.

[Joel Merrill]

Very good points! I've been reminding my kids that it is never too early to start thinking about retirement. When you are still in your twenties, retirement seems like a long ways away but it takes a long time to build up a retirement next egg and the early years are the most important. I was lucky enough to get a job with a company with a good retirement program when I was 23. I wasn't smart enough to realize the importance then. I'm not going to have anywhere near a million dollars but I should have enough. I'm not planning on having any social security by then. If there is any, fine, but I'm not planing on it. I consider that money down the drain, stolen by congress.

A big problem I see is with young adults wanting everything now. They spend every penny they have on toys and non-necessities. They can't drive a used car, they have to have a new car. They can't get by with a regular TV, it has to be a big screen. They can't get by with one or two hobbies, they are into everything. I know guys who don't make as much as I do who have a room full of guns and fishing gear, a boat, a motorcycle, a quad runner, a race car, a beefed up 4 wheel drive truck and they a keep buying more stuff. They have to be buying on credit, they don't make enough to pay for it all.

A lot of it is caused by the parents. When I was a kid, very few kids had a really nice car for their first car. I didn't know any kid that got a new car. They were usually one step from the junk yard. Here where I live a lot of kids are driving brand new Trans Am's, Mustangs and 4WD trucks. There are no junkers in the high school parking lots.

When they get out in the working world, they want to move right up and be the boss even though most of the rest of us have worked there longer than they have been alive and we aren't the boss.

I'm not rich by any means but I'm living comfortably and I should be able to retire comfortably but that hasn't happened all at once. There has been some very lean years. I have had to do without a lot of "things" just to get to where I am now. I've been out of high school and working for 33 years. A young person just getting started shouldn't expect to live at the same level as someone in their 50's. It's a lot like a monopoly game, you start out small and with planning and wise discussions you slowly get more money over time. No one wins at monopoly the first time around the board.

Joel

[Billy Cox]

A lot of it is caused by the parents. When I was a kid, very few kids had a really nice car for their first car. I didn't know any kid that got a new car. They were usually one step from the junk yard. Here where I live a lot of kids are driving brand new Trans Am's, Mustangs and 4WD trucks. There are no junkers in the high school parking lots.


I think that many parents try to give their kids what they wish they had when they were teens. As for me, I had to wait till I was 30 to get a Mustang.

[Brad Mercer]

Dave,

I never really focused on finances, and occasionally made some extravagant sacrifices along the way, so I've got nothing. But I have listened to good advice here and there. I once heard the late W.A. Criswell, pastor of First Baptist Dallas for 50 years, say that a person would do well in life who from his first paycheck tithed 10% and saved 10%. I heard a co-worker once return from a financial seminar of some sort say that the seminar presenters told the participants that if you took two people of the same age and one saved a set amount from age 20 to age 30, saved nothing else until age 65, while the other person saved nothing from age 20 to 30, but saved the same set amount from 30 to 65, the person who saved for 10 years earlier would have significantly more money to retire on than the person who saved for 35 years but started 10 years later. Don't know if it's true or not, but it sounded good.

And finally, I remember you writing here once that the secret to retiring rich is simply to spend less than you earn (as opposed, presumably to earning more than you spend, which would leave a person thinking if only they could earn more than they do, however much that is, then they would save).

I've passed all those little tidbits on to my kids. I didn't tell them it was important to get rich, or that that was something I highly value, but I did say this is how some smart people say it's done.

All three of them got jobs as soon as they were old enough, and from their first paychecks tithed 10% and saved 10% specifically in an account designated for retirement, which they've not yet touched. Any big ticket items they wanted to save for was saved for in a second savings account.

I've told Wesley, my 20-year-old, that when his retirement account reaches $5,000, which it's approaching, that it might be a good idea to approach a certified financial planner with someone like Edward Jones for advice on how to invest that money more wisely than a simple bank savings account.

I've now exhausted my store of advice, all of which they're taking. I guess the rest is up to them.

I think they do understand that competing life choices, either destructive or noble, can overwhelm those financial habits and nothing is guaranteed. I want them to be able to say with Paul "I have learned in whatsoever state I find myself, therein to be content." On the other hand, I like a poster I saw once somewhere. It said: "I've been rich and I've been poor.... Rich is better." ;-)

Brad

[William Hunter]

It seems to me that many people in our nation have unrealistic expectations in a variety of areas of life, based on their current habits and behaviors. Like assumptions, such expectations are almost always wrong.

I watch people in line in front of me spending so many dollars on the lottery (gambling) which is a form of lacking trust in God to me. I would think he would have us be better stewards of the money He provides than spending it on lotteries, etc. and throwing our money away on such things. I would think He'd rather see us invest it, even it if is nothing more than a savings account, than try some failed scheme to obtain money the wrong way. If we were more deligent with His money (it all comes from Him), maybe a few more of us would come closer to some good goals for savings for retirement.

At each raise Virginia and I try to keep our standard of living at the same level so we can invest the increase. We use some of the increase beyond tithe to support children through our Compasionate Minsitries Children's program, etc, and missionaries we personally know. Isn't self-discipline a fruit of the Spirit? It seems to me that if so, we should be better at controlling materialistic driven mindsets. We are seeing some of our cong. taking such steps after watching me and Virginia. Some have gotten out of debt except for what they owe on their houses, others are in the process. You should the release and freedom they express after changing directions in spiritual lives concerning their financial appetities, etc. We have picked up several new tithers just from seeing our peole find freedom for the slaver of materialic driveness.

[Dave McClung]

I've told Wesley, my 20-year-old, that when his retirement account reaches $5,000, which it's approaching, that it might be a good idea to approach a certified financial planner with someone like Edward Jones for advice on how to invest that money more wisely than a simple bank savings account.

;-)

Brad

Brad
Yours was a great post. Your advice to your kids was right on, but I want to talk about using a "certified financial planner." I have used several of them, but have learned to be careful.

The problem is simple. Each of us would like to have the advice of someone who really knows investments. Those who are experts have become so wealthy that they are busy with their own assets. Many times the ones who are practicing are the ones who have not been successful with their own money.

I remember a few years ago when my bank approached me with the idea of offering the services of a financial planner to my senior employees as a perk. It sounded like a good idea, because several of them had no business education (they were engineers) and were making a lot of money. I decided to try it myself as a test. During the process, I became fairly close to my advisor, close enough that he confided that he was very close to bankruptcy. After considering his advice, I decided I could do better myself.

If I were advising your son, I would tell him to spend some time on Morningstar.com. They have on line courses on the basics of investing. Once your son has become familiar with investing, he may then want to consult a certified financial advisor.

A good choice for a person in his situation would be to put his retirment savings in a fund like the Vanguard 500 Index Fund. The advantages are: no commission cost, low fees, broad diversification, and higher earnings than a savings account over the long run.

You didn't say whether his retirement savings are in a Roth IRA. If not, that is where they should be. A Roth IRA will allow the money to grow without additional income tax. Over 40 years, that will make a very large difference.

Dave

[David McClung]

I am certainly not qualified to give advise on this subject but Dave is right on the money here. Whether you go with a Roth, mutual funds, bonds or the comodities market, The best move in investing is to Diversify...

Do not put all your eggs in one basket. Spread it and monitor it every few days on your own. Do not trust someone else to take care of watching over this themselves.

There is money to be had out there but you have to do your homework first.

Great post

[Brad Mercer]

Thanks, Dave. I've copied and pasted your entire post into an e-mail to Wesley.

Brad

I want to talk about using a "certified financial planner." I have used several of them, but have learned to be careful.