For the past 30 years – pretty much all of my adult life – I have been a planner and a worrier. I am the type of person that starts packing two weeks before a big vacation. I am the type of person that starts putting a Thanksgiving grocery list together in OCTOBER. It isn’t that I plan to worry, I just worry if I don’t plan. These traits are deeply embedded in the genetic code of my family going back multiple generations. At times it can be a good thing to keep me on track, but often it can be overwhelming and take up too much of my day. If I get this worked up prior to a beach vacation or family holiday, you can only imagine how I feel when it comes to retirement planning.
One of my biggest fears in life is running out of money in retirement. The idea of working in my 70s and becoming a burden on my kids has caused me to lie awake at 3AM more than a few times. I know how hard retirement planning is going to be for today’s youth so I do not want to add taking care of mom and dad to their plate. Now I am not just worrying about my own retirement, but the retirement of my children 50+ years away.
How have I learned to deal with this and prevent what is left of my hair from falling out? By identifying which factors I have control over versus the factors I do not. I have no control what the market is doing, at what age I die (outside of eating less Kansas City BBQ…not happening), or what the federal tax code is going to look like in 20 years. What I can control is my savings rate, which funds to invest in, and doing my best to eliminate debt.
I was lucky growing up that my dad was also a planner/worrier, and he taught me at a young age to save and then save some more. He worked for the same large company for 33 years, working long hours, often travelling more than he was home, and missing valuable family time for the good of the company. At the age of 53 the company decided he was too old and “retired” him. It was a scary time and had he not saved for a rainy day, our family would have been in the middle of a monsoon. Thankfully he was a third generation planner and was prepared by saving, living below his means, and reducing debt. I’ve always admired him for taking control of his financial situation and not leaving his later years to chance. He has been retired now for 23 years and is still going strong.
Like my dad taught me, every time I received a raise I would add one more percent to my 401k. One percent makes a huge difference and over time it really adds up. This went on for years until one day I proudly called my dad to tell him I reached the annual 401k limit. After the first year of maxing out my 401k I was hooked and continue to do it every year. Small, simple steps of adding a little more each year has made a huge difference in my retirement portfolio.
Choosing a fund from your 401k lineup by the name is a little like buying a bottle of wine based solely on the label. It may look good at a glance, but you could end up overpaying for a bottle of vinegar. Many people sign up for their 401k soon after they start a new job, pick a few funds that sound promising, and then ignore it in the hopes it will turn into millions 30 years from now. If you have a medical issue do you self-diagnose on WebMD and hope for the best? No, you go get professional help. This is where blooom comes in to heal what ails your 401k by making sure you are in the lowest-cost funds available in your plan that will meet your appropriate time to retirement and risk level.
Debt is an anchor that really weighs down your ability to reach financial freedom. Every dollar going to credit cards, car loans, or mortgages is one less dollar going towards retirement. In my early 20s I got my first credit card and racked up some debt purchasing items I had to have at the time, but looking back were a waste of money. My wife did the same and when we got married we had close to $10,000 in credit card debt. Realizing that this was going to prevent us from buying our first home we went on the Hamburger Helper budget plan*. For a year we stayed home, ate Hamburger Helper, and put every dollar we saved towards our credit card balances. It was a hard lesson on getting out of debt and we vowed to never get in that situation again. I’m proud to say that at 45 our house is paid for, both cars are paid off, and we are 100% debt free. Now every dollar we used to put towards credit cards, car loans, and the mortgage now goes to our retirement plan. Again, focus on what you have control over and let the rest go.
With age comes wisdom and while I still tend to over plan/over worry I feel empowered knowing that I have taken control of my financial situation. I am not a financial planner, but working at blooom makes me proud because I know we are helping people who traditionally have not had access to financial help. My personal goal is to help just one person avoid the Hamburger Helper budget plan!
* FULL DISCLOSURE: we couldn’t afford Hamburger Helper so we bought the generic Panburger Partner. All of the goodness of Hamburger Helper at half the price!