Learn the incredible value in making "imperfect" financial decisions

As a Financial Planner, I take great pride in guiding my clients towards making the best possible financial decisions.  

But... I'm going to let you in on a little secret. 

I really enjoy helping clients make good financial decisions, but I LOVE helping them make imperfect financial decisions. 

Let me explain a bit... 

But first, let's clarify something

Why do we do financial planning in the first place?  

  • To determine whether or not we can retire comfortably

  • To focus on "extra" goals such as leaving money to heirs, leaving a legacy or education planning

  • To give us peace of mind that we can still live the life we want both now and in the future

In my experience, most people are focused on that last bullet point.  

We want to know that we can live the lifestyle we want, both now and in the future.  

Anything else is just an extra bonus. 

Oh, here's another thing I want to clarify...

Most of us tend to fall on a financial planning / life approach spectrum... 

Those focused on living for today at the expense of living in the future 

Those focused on saving for the future at the expense of today's enjoyment 

Image by Debora Bacheschi
Image by Chris Liverani

This article was written for the Saving For The Future group.

Because, well... The Living For Today group has no problem making imperfect financial decisions. 

Let's get to the point
And then explain it again in a few other ways... 

The point of this article is... 

If you are doing enough of the "right" things:

  • Saving a sufficient amount

  • Investing properly

  • Living within your means

Or if you have some potential windfalls in your life:

  • A profitable business sale in your future

  • A sizable inheritance you can plan on

  • A house that will be paid off early

You can afford to make some decisions that add more to your "present happiness" column instead of the "future net worth" column.  

In other words:

Don't feel bad about spending money on something that makes you happy NOW if you're doing the right things for your future. 

Let's talk about some examples of how we sabotage our current happiness

1) Overexaggerating the negative effect of our decision

 

I have a friend who has previously pulled himself out of debt. He's made a ton of financial progress, lives a reasonable lifestyle, and has a greater than 50% chance of inheriting a significant amount of land in the future.  

For over five years, he's been talking about how much he wants to buy a motorcycle again.  His wife recently gave him the okay to purchase one! 

Aaaand, let the analysis paralysis kick in! 

Let's say he buys his dream bike for $20k and either:

1) finances the loan through the dealer or:

2) pays cash 

SS 80%.jpg

Long story short, Yes Social Security will still be around when you retire. But you may take roughly a 20% cut in your benefits. 

A pay cut doesn't sound too inviting...

Here's why I don't expect you to take one. 

Let's start by looking at two sides of the Social Security coin. 

  • The politicians who vote on Social Security funding. 

  • Those of us either receiving (or expecting to receive) benefits.​

Maybe you've noticed a few things about politicians.  

They've got a pretty sweet benefits package and:

They like getting re-elected. 

Knowing this...

Do you think any politician will cast a vote that would reduce the benefits for retirees who are already receiving Social Security benefits? 

My guess is no since retirees make up the largest amount of active voters. 

Image by Parker Johnson

Do you think any politician will cast a vote to reduce benefits for people 5-10 years away from retirement? 

Maybe. But more than likely what will happen is an elimination of the various "loophole" Social Security strategies first. (which has already been done). 

 

Followed by a possible slight reduction in benefits (which I believe is unlikely). 

I believe that anyone who is 5-10 years from retirement needs to pay attention to potential Social Security changes and account for this with more flexible Retirement planning

But ultimately the bulk of Social Security changes will fall on those 10 years or more from retirement. 

Image by Alexander Dummer

I was born in 1981 so I'm in that "younger generation."

(Technically it could make me a millennial but we'll just ignore that...)

The younger generation generally thinks that Social Security won't exist by the time we reach retirement.  

We expect to receive NOTHING. 

Since it's inception in 1935, Social Security has had OVER 19 Amendments. *

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*SSA.GOV

Who taught them how to count? 

Each of these amendments has slightly changed the various moving parts of Social Security which has allowed the trust fund (water) to stay full enough to provide current benefits without pay cuts. 

In 1983, Congress gradually increased the full retirement age from 65 to age 67, implemented a slight payroll tax increase and implemented a few other changes that we see as normal now and it filled the bathtub water back up for another 30+ years.  

With the current projections that we will run out of money in 2037, I'm fully confident that we'll make similar adjustments as the time gets closer to fully fund Social Security for another 30 years.  

Let's sum this all up:

  • We currently have enough "water" in the Social Security bath tub to keep paying as is until around 2037. 

  • With no changes, we could continue paying roughly 80% of current Social Security Benefits. 

  • We have modified Social Security many many times in the past and will likey do so again sometime in the next 5-10 years. 

  • Like we've done in the past, a combination of small "tweaks" to the various Social Security programs will likely be sufficient to shore up Social Security for a number of years to come. 

If you are interested in a no cost Social Security review, feel free to schedule a phone call.  We're happy to help...

We're a different kind of financial firm than you may be used to. ​