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  • Writer's pictureJimmy J. Williams, CPA/PFS, CFP®

As Easy As 1-2-3

Life is easy. We make it harder than it must be. I had an opportunity recently to speak with a 22-year-old young man who asked many questions pertaining to lifetime wealth. He had studied at a prestigious university and devised an intricate and detailed plan to achieve his goal of saving a million dollars by age 35. After he had finished his session explaining the complex, and arduous plan, I asked a simple question: “Would you mind if I gave you a simpler plan with greater probability for reaching your goal?”

The puzzled and defeated look on his face said all that I needed to know. “No,” he replied, looking disappointed that I did not brag on his inclusionary plan. I explained to him my philosophy of making complex matters simple. He was interested and looked intrigued at that statement. His complex plan was, for all intents and purposes, a grand one that could be documented, but lacked a certain attraction to keep him excited about life.

To alleviate his fear of the complete scrapping of his plan, I offered an efficient, exciting, and responsive plan to his efforts for the goal he described. I told him that I call it the “1-2-3 Plan”. Now, he was genuinely interested!

First, always live within your means. Too often people do not allow themselves the opportunity to enjoy their status in life. Patience is a virtue and a lesson hard to learn when you are in your 20’s and eager to get life started. However, we discussed the importance of knowing where each of his earned dollars was going so that he could measure his effectiveness in saving. The goal, I informed him, was to save 10% of every dollar for his future. He was ecstatic! Quickly he shouted, “I had planned on saving 30% of every paycheck.” Unless you are planning a life of austerity, it will be difficult to save such a significant amount of each payroll, I explained. Do not set yourself up for failure. However, if you can save more, such as when you receive bonuses, pay raises or other windfalls of funds, then do so.

Second, invest for the long-term. When you are investing for the long-term, understand that these funds are for the retirement years and not for emergencies that may arise in life. I asked him how much he had saved for emergencies, and he was to state that he had $1,000 in his savings account. After congratulating him on this accomplishment, I asked if he knew how much he needed each month to live. “Approximately $2,500,” he shared. The most appropriate amount of emergency funds should allow you to live undeterred for three to six months without feeling that you have changed your lifestyle. He quickly realized he had some additional work to do.

Third, learn to build an attitude of patience. When I was fresh out of college, I could not wait to hit the ground running in my career. Looking back, I could have taken a little more time to “smell the roses” as they say. Life is never linear. There are unexpected events, turns in the road and challenges that were unknown that seem to appear at the most inopportune moments. By learning to be patient with yourself, the satisfaction you gain is one of gratitude. Being grateful is one of the byproducts of becoming financially independent.

We have clients that were career schoolteachers and have learned to live an extremely rewarding life in their retirement years because of this 1-2-3 Plan. Today, many people who earn less than $100,000 per year are living a wonderful retirement. By purposely living within your means, saving with the long-term in mind while being patient, you will truly be living a life by design. If you need assistance in developing a simple, yet effective, plan for your future, seek out a CERTIFIED FINANCIAL PLANNER™ professional today. Do not wait too long to plan for the future. It arrives sooner than you think.

Registered Principal Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Jimmy J. Williams is an Investment Advisor Representative of Compass Capital Management, LLC, a Registered Investment Advisor. Cambridge and Compass Capital Management, LLC are not affiliated. 321 S. 3rd, Ste. 4, McAlester, OK 74501. Cambridge does not offer legal and tax advice. Please consult your legal and tax advisor for specific estate and income tax planning strategies.

The information in this article is for educational purposes only and is not intended to be tax advice.

Past performance is no guarantee of future results in any investment. Investing involves risk including the loss of principal.

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