Avoid lifestyle creep
April 27, 2018
Director of Communications
Well, that’s what Thomas J. Stanley and William D. Danko say in the 1996 bestselling book, The Millionaire Next Door. Though the idea of $1 million once evoked great wealth and riches, conventional wisdom today suggests that the average person needs at least that much saved to retire. However, according to a recent CareerBuilder.com survey, 78% of American workers live paycheck to paycheck. No, it’s not just millennials with their mounting student debt and love of avocado toast. Anyone can fall into the trap of keeping up with the Joneses—or the Kardashians, as the case today may be (just tune into any of the The Real Housewives franchises). As income rises, typically in one’s 40s, lifestyle creep can very easily take hold. Rising housing costs, second homes, private school tuition, college tuition, luxury vehicles, and exclusive vacations can quickly add up!
The general premise of The Millionaire Next Door is the importance of living beneath your means. This concept flies in the face of today’s culture of over spending and oversharing, yet it is often necessary to achieve long-term financial goals.
In addition to being the month when taxes are due, April is financial literacy month. Just as you may spring clean your house, we encourage you to “spring clean” your finances. Here are some simple ways to begin today:
- If Uncle Sam reimbursed you for overpayment of taxes, don’t go on a shopping spree! Instead, put that money to work by investing it, putting it in your child’s 529 plan, or paying down debt.
- Increase your 401(k) contributions or have a portion of your paycheck automatically deposited into a savings account.
- Check out MissingMoney.com for any unclaimed property.
- Double check your automatic payments. Do you really need Netflix, Hulu, Amazon Prime, Apple Music, and cable?
- Begin tracking your spending.
- Create a personal philosophy of wealth.
At Balentine, we utilize financial planning software that allows us to help our clients with many of these tasks, but perhaps the most popular feature is real-time scenario planning. Utilizing this customized program, we can plug in various scenarios (e.g., Can we afford to buy the beach house at Sea Island?; What if I send my daughter to boarding school beginning her freshman year?; What if I sell my business at 8x instead of 10x?) and see how each would impact a client’s portfolio over the long term. With that knowledge, we can then help clients establish plans to meet their objectives—whether it’s buying the South Georgia plantation or retiring at 65 and enjoying life with the grandchildren—in a way that fits into their lifestyles.
Contact a Balentine relationship manager today if you’d like to learn more about these financial planning capabilities and how they can help you achieve your goals.