If the world were perfect, however, everyone would have the same financial opportunities and live a life of comfort and happiness with no financial concerns. But, in fact, the world is not perfect — regardless of the income people earn, the state of our current tax structure or how interest rates will affect first time home buyers. This is because people are not created equal — whether in the classroom, the athletic field, or, with financial skills. All of us, regardless of financial status, have good and bad habits. Occasionally, luck passes our way — but most times it doesn’t. And, even though we often make good choices in life; on occasion, we also make some real dumb ones, as well. From these mistakes, life doles out the resulting punishment we oftentimes deserve.
In America, we have more control over our future direction than almost any other country on the face of the earth. Now having written that, it is extremely interesting to learn from recent surveys that the top 20 percent of American earners pay over 84 percent of income taxes. So, why do the poor remain poor when the top earners are paying the bulk of income taxes? It may very well be that taxes have little to do with this so-called “rich-vs-poor” scenario. Maybe the poor remain poor because they haven’t been taught the financial skills to understand how money works . . . and grows.
Probably one of the most elementary, yet fundamental tenets of financial planning says that you don’t invest — until you have adequately saved. And, unfortunately, savings continues to be a real dilemma for the average American consumer. Most, actually, have very little set-aside in savings for a rainy day or financial emergencies that invariably come about. When I began my business career some 40 years ago, I was taught a very basic financial lesson that went like this: there are those who will spend their incomes each month and then save what is left at the end of the month. On the other hand, however, there are those who commit to saving a certain amount each month, and then spend the balance. What is the lesson taught from this example? It is that people in the first example usually end up working for those people in the second.
Life in American today for far too many is one big financial binge that can create a lifetime of debts, notes and credit card debts. How then do we turn things around? How do we commit to a brighter financial future for ourselves and for our children?
I think it starts with the discipline of saving first each month. This beginning requires a budget to be instituted where we pay ourselves “first” each month — instead of “last.” Now, saving money in my book has a lot different definition than investing money. There are plenty of horror stories of those who invested in Wall Street first before accumulating adequate savings. And the results of those stories have been painful.
Here’s an idea: begin this process looking at the mirror and asking yourself a few key questions: “How much can I put aside and pay myself first each month?” “In order to be where I want to be financially in five or 10 years, what will it take to achieve that goal?” And finally, “can I commit to this goal and resolve to stick with it?” It may be only $5 dollars a week, but every great accomplishment starts with a first step. Remember, Rome wasn’t built in a day and neither will your financial fortune. Are you ready to take that first step you’ve been procrastinating on each year?
To my way of thinking, the poor today are not getting poorer because the rich are getting richer. Rather, succeeding financially today requires skillfully setting goals and understanding the rules of how money can work to your advantage. We’re just starting a new year and with that the promise of new goals and new opportunities for 2016. A little sacrifice on your part today can go a along way towards building the financial momentum you will need.
» Ike S. Trotter, CLU, CASL, ChFC is a credentialed Financial Advisor with the Ike Trotter Agency, LLC, in Greenville.