A journey of a thousand miles begins with a single step. – Lao Tzu
It’s race season. With the Bluegrass 10k and other races in Lexington approaching, there has been much discussion about training and running plans in the office. This recent talk about running made me realize that achieving a financial goal is a lot like achieving a running goal. Smaller goals are easier and quicker to achieve, larger goals take more diligence and time. The path to a larger financial goal, such as achieving financial independence, is like training for a big race.
Walk Before You Run
Just like you need to stretch and warm up before you take off running, you need to get a few bedrocks in place before you start building your financial house. The top priorities here are bad debt and an emergency fund: eliminate the former, and build the latter.
Not all debt is bad debt – high-interest credit card debt will be a drag on your future progress, whereas a home mortgage will allow you to build equity in a physical asset that can appreciate over time.
An emergency fund is your backstop against being forced into bad debt. Think of it like your own self-funded insurance policy that is there to protect your financial plan from being completely derailed if you must deal with a rainy day. Once you have done these two things, working toward your other goals will be much easier.
Be Diligent and Consistent
After stretching and warming up, you are ready to start moving. Most people will not be able to run a full marathon on day one. Most of us will need to get into a training regimen. Start with a mile today, a couple of miles next week, then keep increasing as you work toward your goal.
Similarly, with your financial savings, most people will not already be financially independent on day one. Start by automating savings into your retirement accounts. If maxing your 401(k) does not fit into your cash flow today, consider setting up periodic automatic percentage increases. You may not even feel the difference in your paycheck, but the increases will go a long way toward achieving your financial goals.
Other financial goals can be accomplished in a similar way. Maybe you want to help your children pay for college or help with wedding expenses in the future. We also like to see mortgages paid off before retirement. Whatever your goals may be, the key is to get started, increase when you can, and stay diligent and consistent.
Set an Example for Your Family
Eventually, you will have trained and be ready to run the long race. As your family, friends, and loved ones are there to cheer you on as you cover mile after mile, you are showing them an example of what hard work and persistence can achieve.
Likewise, with your financial goals, you can be an example for your children and family. As you work toward, then achieve your financial goals, your children will see your example. Teach them the importance of saving for the future by doing it yourself and showing them how they can do the same.
If they get a job mowing lawns or being a lifeguard in the summer, encourage them to set up and contribute some of their earnings to a Roth IRA. As they grow up and begin their career (or if they have already begun their career), encourage them to automate savings for retirement and other financial goals as you did. There are unfortunately very few school curriculums that teach financial literacy – you can give your children an advantage by sharing your knowledge on the subject.
We take immense pride in helping our clients achieve their financial goals, and we get an even greater sense of happiness and purpose when our clients return the favor by helping the next generation.
You may have seen our emails inviting you to register for the Bluegrass 10,000 on July 4, 2023, then join us with your friends and family afterward. You can register for the 10k or 1-Mile Fun Run here – use the code BALLAST23 for free registration.
