I Deserve to Go To Africa. Who's With Me?
Several friends have sent me pictures of their amazing wildlife safaris in Africa. Now it's my dream to go, but it's not cheap (at all). While we're at it, life and kids aren't cheap. And for that matter, I'd like to retire first, which isn't cheap. But it's my dream, so I should go for it, right? I deserve my dream after a long life of working!
But I don't have that kind of spare cash lying around. And to be honest, it won't be fun if I spend the whole trip stressing out over the mountain of debt I'm building. I've worked hard, but I can't afford my dream. Now what?
From what I'm seeing with my students, I'm not alone.
A common theme I hear from my recruiters is that new college hires aren't taking full advantage of their 401K matching opportunities and stock plans, or making decisions around vesting schedules. Even though the best way to become a millionaire is to start investing in your teens.
Yet I survey thousands of college students each year, and nearly 2/3 expect to retire before they are 50, although almost none of them have opened a retirement account yet.
While Transamerica research found that Millennials are starting to invest in retirement much younger than previous generations, the ones I'm seeing still aren't investing enough. I asked one of our Behavioral Finance professors to talk to my team about retirement, and he showed us this great chart from Fidelity about how much you need to have invested at different ages. It says by age 30, you should have the equivalent of your annual salary invested in retirement, and by age 40, you should have 3 times your salary saved. (Anybody breaking out in a cold sweat???) Most of the 20-somethings I work with are not making great progress toward this goal. But then again, many of the 30+ crowd are struggling, too!
Saving isn't easy for young people. According to College Board, annual 4-year in-state tuition and fees converted to 2016 dollars have nearly quadrupled in the last 40 years. Meanwhile, housing costs as a percentage of median household income in real dollars have nearly doubled. So basically, money is tight for all of us, but especially young people!
So what to do?
If you're an employer, host financial planning seminars with your employees (not offered by people selling services!) to talk about retirement, disability insurance, long-term care, and even financial planning for families. Young people are struggling, but older employees supporting both parents and children at home also need help. Financially secure employees are more productive and committed!
If you're working on your own finances, evaluate your mindset regarding money and "stuff", and how they are either a reflection of your worth or an entitlement for your efforts. They're not! It's just stuff!! In fact if you can, just sell it all and pay off some debt. How great would that feel?
One reason I fell in love with my husband was that he was driving a car with 160K miles and a cracked sunroof, because it "runs just fine" and he bought it with cash. Debt-free is my kind of sexy! Ladies, if he's got a bunch of flashy stuff he can't afford, run the other way!
Dave Ramsey puts it well in his wonderful financial training materials when he says you need to "live like no one else [now], so you can live like no one else [later]." In other words, live frugally now, invest early, and then you'll have true financial freedom later.
So here's the thing. I can't afford to go to Africa right now, but I want to. I also want to retire, and I don't want to be dependent on the state's pension plan, which will never adjust for inflation. And I don't want to be a burden on my kids one day. All of my dreams are possible.
I drive an older car than most of my college students, but I paid cash for it and it runs fine. I'll use an electronic device until the operating system can no longer be upgraded. I have suits older than my teenage daughter that I still wear to work, because they're classic.
And I will slowly continue to put away money for retirement and money for an African safari.