Highway 212 by Matt Duncan

While working with employees at retirement plans over the years, one thing I’ve realized is that being disciplined to save for retirement is challenging and there are many obstacles to doing it successfully. For those living the northwest, saving for retirement can be particularly hard due to the average wage vs. the cost of housing.

Income vs cost of living

When thinking about specific clients that truly save well, regardless of income, a theme that I see is all of these people have a specific mindset towards saving and understand how to achieve short term and long term goals. Over the past month I’ve had a few things cross my life about perspective and goal setting that I wanted to pass along:

First order vs. Second order consequences

A book that I’m in the middle of listening to is by a famous investor Ray Dalio who is the founder of Bridgewater Investments, the largest hedge fund in the world at 160 billion. Dalio, is one of the most successful investors of our time and has some truly unique ways of managing his team and thinking through problems. One passage that really stuck out to me is:

“I’ve come to see that people who overweight the first order consequence of their decisions and ignore the effects of second-and-subsequent-order consequences rarely reach their goals. This is because first-order consequences often have opposite desirability’s from second order consequences resulting in big mistakes in decision making. For example, the first order consequence from an exercise plan (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable.”

This principle holds true for investing towards retirement as well. By saving a $100/month for their future, a person is giving up something today (coffee, vacation, entertainment) in order to have a more desirable retirement. In other words, this is a first-order consequence and second order consequence type of decision. While this concept is not a unique one, I’d never heard it explained this way and it resonated with how I view decision making.

What’s your “This” in order to get “That”

A friend of mine made the comment a few weeks back “Has your company done the whole let’s set goals for 2018 and never check back in on them again movement?” Unfortunately, corporate goal setting has that stereotype. Often, because it’s true. Luckily our company has Jill, a mother of four and a low tolerance for time wasting activities. She recently implemented a quarterly system for goal setting and tracking. Our team has high hopes for this new system and we’ll ultimately see how it goes. My big takeaway from our time talking about goals was the video she presented by Dr. Henry Cloud called “Start Small”. In this video he speaks to how we all want to get to the big goal but have a hard time setting and sticking to smaller goals.

For some of the guys in our office this meant going on the TB12 diet plan to prepare for our upcoming middle aged athletic endeavors (for me my city league basketball team starting in late January. Wish me luck!).

For you, similar to the Dalio piece, maybe this means looking at what your long term goals is (i.e. having X amount of money at retirement) and shrinking that down to what do I need to do this month/this week in order to get a little closer to that goal.

At the end of the day, the phrases “mindset” and “goal setting” can sound really cheesy, and when done poorly can lead to nothing. However, when we look at our collective social circles and see people who have reached their goals (whether those be physical, business or relationships) often times they are using mindsets like the ones Dalio and Cloud are talking about. Hopefully these can be somewhat inspirational when it comes to putting away additional funds towards your savings goal.

If you have questions or would like to have a conversation about your retirement plan, please don’t hesitate to email or call our team!

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  #1: Know Where You Stand Financially

Whether because of singleness, divorce or death of a spouse over 90% of women will be managing their money alone at some point in their future. Because women tend to save less and live longer, it is critical that women start looking out for themselves financially!  The good news is there is always time for course correction. Below are a few tips to help you know where you stand financially.

1. Get involved in your household finances. Don’t be afraid to have the hard conversation with your significant other - your future may depend on it. Some couples find it helpful to set up a financial date night. Set some guidelines for the conversation. It can be an emotional topic so try and keep it light and educational.

2. Make sure you and your significant other are fully maximizing employee benefits, especially any employee match to a retirement plan, life insurance, and disability benefits.

3. If eligible contribute to IRAs; learn about and take advantage of the spousal IRA.

4. Have jointly owned as well as individual bank and credit card accounts. Speak with your trusted advisor about how you can protect one another in the event of a death or disability - you want to have access to accounts if you need them.

5. Most importantly, know where all the money is and keep log-in credentials for all accounts stored safely.

#2: Have a Plan

Envision retirement! Whether it is around the corner or 30 years away it is important to envision what you would like your future to look like and then plan for it. Whatever your income may be, it is never too early or too late to create a plan.  In our experience clients that have gone through the planning process tend to have more contentment, assurance of their future and unity with their partners.

A financial plan can help answer questions such as:

1. Are you saving enough?

2. Are your assets allocated properly?

3. Are you properly insured?

4. What will happen to your assets when you die?

5. How will you know if you have saved enough and can retire?

#3: Don’t Forget to Budget!

In our experience clients that budget tend to have a high rate of success at reaching their financial goals. When we take stock of what we are spending it is amazing to discover how trivial things may be eroding our wealth accumulation day by day. And you don’t need to re-create the wheel: there are some great budgeting tools out there that can help. One tool we like to refer clients to is YNAB (You Need a Budget). You can do research and find all kinds of tools and apps.  Many are quite user friendly and have apps that you and your significant other can both use.

#4: Put Your Money to Work and Ask for More!

1. Part of any good investing strategy is putting your money to work for you. If you are afraid to invest talk to your financial advisor about your fears and how you feel about taking risk. There are many different strategies to accomplish your goals. By expressing your fears, exploring the options and educating yourself you will be equipped to face your fears and overcome them or at least minimize them. The sooner you address your fears around investing the quicker you can put your money to work.

2. Ask for a raise! Although the gender pay gap is closing there are still many women that are not making as much as their male counterparts. One reason for this is that women are less likely to ask for a raise and advocate for themselves. Equip yourselves by working to achieve job goals, deepen your level of expertise and research what others are making in similar positions. At your next review present your findings and then be prepared to ask for that raise. You might be pleasantly surprised by the response you receive. Commit a portion of those new dollars towards your long-term goals and get them invested.

#5: Consult with Your Trusted Advisor

Having an advisor to assist and guide you on your journey can be a game changer.  Don’t be afraid to ask your advisor the simple and complex questions so you can be involved in the conversation.  If your advisor is not a good fit, look for someone you feel comfortable with, can trust and can easily talk with.  An advisor can provide you with accountability, a roadmap for retirement, counsel in turbulent times and help with financial discipline.  They can also be a huge asset in the event of a death or family emergency.  We have helped many families navigate these difficult situations as an added support.

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