Focus on You: Strategies You Can Control for A Better Financial Future

It’s graduation season, and there’s an excitement in the air about starting a new chapter. Mixed in with this excitement is an element of stress to make the right decisions: decisions on how things should be done, when they should be done and where they should be done. All these decisions are common, but they often distract from the purpose of what comes after high school.

We need to remember that higher education has a purpose. It’s more than an experience. The purpose of a college degree is employment. It is an investment, and as with any other investment, you should be calculating the return on that investment.  Spending $100,000 for a degree that secures a job with an annual salary of $40,000 is not the best rate of return.

There are plenty of creative ways to get a great college education without breaking the bank. Parents can start a 529 plan, the earlier the better, to help cover costs. Students can begin their higher education at a community college or secure college credit via Advance Placement (AP) exams. Additionally, students need to be sure that the field they are spending their time and energy on is going to reciprocate by providing solid career opportunities.

Making the wrong decision is not simply an unwise financial move. It can have lasting implications. Recent figures show that outstanding student loan debt has reached $1.5 trillion[i]. Our younger generation is not only struggling under this debt, they are also pushing off other personal and financial milestones, such as purchasing a house[ii], getting married or starting a family[iii]. These decisions can have long-lasting and far-reaching consequences.

Lastly, let’s not forget the countless parents who put their path to financial independence on hold to financially assist their struggling children. While wanting to financially help your loved ones is admirable, it helps no one to offer assistance at the expense of your own security. Just like when traveling by airplane, you need to put your own oxygen mask on and secure your safety first before aiding others. There are no scholarships for retirement, and you won’t have a financial safety net for the future if you don’t work towards creating it now.

College is truly an exciting time. Our young adults are learning who they are, where they want to go and how they intend to get there. At the same time, we cannot forget that college is a fleeting moment, one that is meant to arm the student with the tools needed to create a brighter and more successful future. Be sure to chat with your students to ensure that this experience does just that, rather than straddle these students with debt and stress.

[i] https://www.marketwatch.com/story/student-debt-just-hit-15-trillion-2018-05-08

[ii] https://www.businessinsider.com/student-debt-preventing-the-us-from-having-normal-housing-market-2019-5

[iii] https://www.bankrate.com/loans/student-loans/student-loans-survey-february-2019/

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Disclaimer:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Investing in mutual funds involves risk, including possible loss of principal.

The principal value of a target fund is not guaranteed at any time, including at the target date. The target date is the approximate date when investors plan to start withdrawing their money.

No strategy assures success or protects against loss.

Coming from sunny southern California, there’s nothing quite as nice as an aimless, leisurely drive down the coast. As delightful as that is, it’s not a metaphor for life. Life is complicated and moves fast. It’s easy to get sidetracked. That’s why when it comes to any of your goals, especially financial independence, a clear vision of what you’re working towards and a developed idea of the best way to get there will keep you in route to your goal. Many folks have a general idea of where they want to go. They want to be fiscally responsible, perhaps investing in a home and saving for retirement while still prepared for the financially unexpected. However, 1 in 3 Americans have less than $5,000 saved for retirement and only 16 percent of those surveyed had more than 15 percent of their income saved. We know that most people have good intentions. So why do their actions take them so far away from their goals?

It all comes down to that lack of a map – not having a well-defined goal and detailed route to get there. Yes, it’s good to know that you want to be fiscally responsible, but if you don’t have a detailed definition of what that means, how do you know when you’ve achieved it? What are you saving for? How much do you need to save for retirement and how much do you need in your emergency fund? What other financial goals do you have, and which ones take priority? Lacking those details may make it easier to get distracted by impulse purchases or detoured by a financial commitment that might not be the best for your budget or your long-term financial goals.

Once you have the destination, then you need to determine the most direct route to get there. Do you have a distinct budget for all your needs and your goals? Are you going to have a monthly amount deducted from your account to your savings goals? Have you considered the influences that work against your goals and what you might do to counter them? Having a distinct plan doesn’t mean that everything is settled. Circumstances may arise that distract or reprioritize your goals. Having a definitive plan, though, can help you recalibrate your course and prevent you from being shifted away from your goals long-term.

The road to your financial independence is oftentimes anything but direct. Between relationships, families, career, health and everything in between, it’s easy to lose sight of your goals. Yet, by thinking things through and creating a detailed plan, we can stay on course. Despite every fork in the road, every decision that tempts us away from our goals, we are able to remember what we’re saving for and the right steps we put in place to get there, which makes it easier to stay on course to our financial independence.

1. https://www.cnbc.com/2018/08/27/1-in-3-americans-have-less-than-5000-dollars-saved-for-retirement.html
2. https://www.cnbc.com/2018/03/15/bankrate-65-percent-of-americans-save-little-or-nothing.html