Word Pictures: Imagining Your Financial Future

By Steve Davis, CFP®


One of my sons is a high school senior and last Friday my wife and I took him on a college tour. Years ago, during those cold and rainy spring days at the Otis Street Little League fields, I thought this day would never come. My folks used to warn, “They grow up so fast”, but I imagined myself stuck at the ball fields forever. With four boys playing back-to-back games, some of those days never seemed to end. But time marches on.

When we arrived at the Massachusetts College of Art in downtown Boston, the first thing our tour director did was lead us to the top floor of the library where we enjoyed spectacular views of the city. She pointed out the other nearby schools, the world-famous museums, and even the Citgo sign above Fenway Park. From there, our group proceeded to visit the different studios, lecture halls, and dorms on campus. Our guide that day was a painting major and perhaps it was this background that allowed her to use her words to so perfectly paint for us the college experience. In our minds, we could see perfectly what school would be like at Mass Art. In a way, the students in our group were transported to the future where they could see what the next four years of their lives would be like.

There is a lesson in all of this. When it comes to achieving financial goals like funding a child’s college education or retiring at age 65, picturing the life of your dreams can be a wonderful motivator. Whatever your aspirations for the future, the only way to achieve the vision of how you’ll spend the years ahead is to commit to a plan that can take you there.

Dreaming and Discovery

How you envision the rest of your life might involve traveling the world or pursuing a career you postponed to raise a family. Maybe you picture spending more time with your family or volunteering at local charities. The point is, everyone’s dreams for the future are unique and there is no one-size fits all financial plan. Taking the time to imagine and articulate your hopes and fears is probably the most important first step. Often times a professional financial advisor can help facilitate this conversation, but some folks are able to do this well on their own. The key is to discover and visualize your ultimate financial goals. Here’s why: If you want something badly enough you’ll make small sacrifices now in order to acquire what you really want later.

I have a client who graduated from college with many thousands of dollars in student loans. This debt created a huge burden that resulted in a lot of financial difficulties during the early years of her marriage. For this client, funding her children’s education was hugely important. She didn’t want her kids to struggle the way she had. This tangible desire to create a college fund made it easier for her to pass up expensive vacations and the like because these would have prevented her from reaching her goal.

 

Roadmaps and Directions

Of course, a vision without action is just a dream. Once you know your financial destination, the next step is to create a roadmap that will take you there.

Bruce Springsteen once sang, “Take a right at the light, keep going straight until night, and then boy, you’re on your own.” While this makes for great rock lyrics, it is lousy financial advice. Instead, it is best to have precise turn-by-turn directions that will help you navigate the twists and turns of life. Create specific and measurable goals and understand which ones can be accomplished in less than a year, which ones will take three to five years to achieve, and which ones are truly long-term in nature. As you accomplish the short term goals, you’ll build momentum to carry on toward achieving longer term objectives.

Just as there are many routes that will take you to the same destination, there are many financial tools, investments and tax strategies that will help you work toward your life’s dreams. If you don’t have the time, interest or inclination to research this on your own, a financial advisor can provide meaningful guidance at this stage.

Over the course of your lifetime, your goals and circumstances may change. There may be detours along the way. Flexibility and planning for contingencies is critical here because just when you make plans, life gets in the way. Events small or large can change everything. Getting laid off or changing jobs can result in the loss of anticipated retirement benefits. Losing your health could force an early retirement. Caring for aging parents may have never been on your radar. The best financial plans are the ones that can adapt for the unexpected, anticipate change and adjust over time.

Enjoy the Journey

My children are growing up and before I know it, they’ll all be off to college. Yes, time marches on. It seemed like just yesterday when I was in college. I once had a professor who said, “It is good to have an end to journey toward; but it is the journey that matters, in the end.”

As a dad, I wouldn’t change anything; not even those long days at the Otis Street fields when my back was sore, my hands were cold and my shoes were covered in dust and dirt. One of the greatest benefits to taking the time to envision and plan your future is that it gives you the ability to live in the present and focus your time and attention on those things that matter most.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.



This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/word-pictures-imaging-your-financial-aid-future

Stanley Johnson: "I'm in debt up to my eyeballs...somebody help me!"

By Steve Davis, CFP®







Click to watch the Stanley Johnson TV ad

    Does anyone remember that funny Lending Tree commercial where a guy named Stanley Johnson appeared to be living the good life? Stanley had the big house, a country club membership, a pool and even a brand new car. When asked how he does it, Stanley responds with a contrived smile, “I’m in debt up to my eyeballs; I can barely pay my finance charges. Somebody help me!”

In January, banks sent out billing statements that included all the charges for those holiday gifts many consumers put on their credit cards. If you were one of the many who used your card to pay for holiday shopping or for that big ticket item that was on sale at year-end, you may be feeling a bit like good old Stanley Johnson right now. Here are 5 tips for getting over your post-holiday credit card hangover.

1. Assess the damage

Go ahead and gather all your credit card statements and list your debts in descending order from smallest to largest. Put this list somewhere visible so it remains on your radar.

2. Go on a financial diet

If you’re unable to pay off your balances in full, stop all discretionary spending for the next month. Put your credit cards away. Just as a dieter will remove cookies from the cupboards when starting a diet, you should remove your credit cards from your wallet. Studies have shown that paying cash actually discourages spending while using credit encourages it.

During the first week, track your spending; know where every dollar goes. Successful dieters learn to track their calories so they know what foods are healthy and what foods are not. While this can be tedious, it helps break bad habits and it also reinforces good ones. Tally your expenses for the week and categorize them under headings like housing, groceries, dining, and transportation. You will probably be amazed at how the “financial calories” add up. Determine where you can cut back and earmark your cost cutting toward the credit card bills.

3. Consolidate

If you have more than one credit card and can consolidate them onto one low interest card, do so. Be extremely careful about using a home equity loan to payoff your unsecured credit card debt. This option sometimes seems attractive since you can write-off the interest you pay. But beware! If you miss a credit card payment you lose your good credit rating, but if you miss a mortgage payment you could lose the roof over your head!

4. Pay off your smaller debts first

Experience the gratification of eliminating your bills one by one. When you start paying off your smaller debts first, you will receive quicker feedback and enjoy the success of eliminating a debt entirely! Once a loan is paid off, apply that former payment to the next smallest debt. You may be tempted to pay off your larger bills first, especially if they charge higher interest rates, but you will be more likely to stick to the plan when you receive ongoing positive feedback and see fewer bills arriving each month.

5. File your taxes and apply your tax refund.

The Internal Revenue Service recently reported that it refunded taxpayers $328 billion last year. On average, Americans received refunds of more than$3,000. If you expect a refund, gather your tax forms, receipts and shoebox of papers and get them off to your accountant right away. The sooner you file, the sooner your refund will be paid to you. Now is not the time to procrastinate. Use your refund toward your credit card balances and then determine whether you should change your withholding to increase your take-home pay.

Once you’re back on track, focus on living within your means. Build an emergency fund for unexpected events, and begin to set money aside for retirement. Doing so will help you replace a “Stanley Johnson smile” with an honest smile of relief, financial success and peace of mind.


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

This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/in-debt-up-to-your-eyeballs

Happy Groundhog Day?

By Steve Davis, CFP®

As I sit here typing, the snow continues to fall.  It looks like we're in for at least another six weeks of winter no matter what the legend of Punxutawney Phil says today.  In fact, it wouldn't surprise me to learn that the good ol' groundhog can't even burrow out of his lair because he's burried under too much of the white stuff.  The way I see it, all this snow will be hanging around 'til at least June! 

We're trying to make the best of it here in Mansfield; I've taken up snowshoeing and the kids have moved beyond making snowmen and have progressed to making all sorts of interesting snow structures.  After the first storm of the year, our boys constructed a snow couch in the front yard.  We used the couch as a prop for a long overdue family photo. 

 

The Davis Family - January 2011

I share this portrait of Sandy and our boys because I work hard not only to serve my clients, but also to provide a nice life for my family.  It is on behalf of my family that I offer you thanks for your business, friendship and trust.  And if you're not yet a client, and would be interested in learning more about what I do, please give me a call at 508-337-9400. 



Here are a couple more snapshots from that fun day.  The first few pictures show the couch and coffee table during "construction".  Later, after the sun came out, Sandy added the decorative touches and directed the photo shoot.  If your family is like mine, every group photo session usually ends with a call to "act silly".  Somehow, I don't think we'll be sending the last photo out with our Christmas cards next year...

 



To cap off the weekend, my oldest son and I went snowshoeing at the Moose Hill Reservation in Sharon, MA.  He is now a sophmore at VCU and was planning to leave for Richmond later in the day.  This was the perfect opportunity to get some one-on-one time together before the end of his holiday break.  It was a gorgeous day all around.