Effective Strategies to Reach Financial Goals
Article by R. Joseph Ritter, Jr. CFP® EA
Would you drive through a covered bridge on a country road? The bridge is dark inside. Is it safe? Will it take me to the other side of the river?
This covered bridge has some similarities to financial planning and especially eliminating debt, resolving a financial crisis, recovering from financial strain, and achieving financial independence. These roads are unknown and often dark. We cannot see to the other side to know if we will safely reach our financial goals.
As we drive up to the covered bridge, we see three signs – a weight limit sign, speed limit sign, and height limit sign. In theory, if I am driving a vehicle within the posted limits, I should be able to safely pass through the bridge, however, it is only a theory at this point because there are at least the three pieces of information we do not have: 1) when was the bridge last inspected, 2) what were the results of the inspection, and 3) whether the bridge has been compromised in any way since the last inspection.
Just like this covered bridge has three limits, achieving financial independence, eliminating debt, resolving financial crisis, and recovering from financial strain require at least three elements to have success.
1. We must be committed. Structural engineers have come before us and determined, in this case, that 3 tons is a safe weight limit. Weights greater than 3 tons could compromise or collapse the bridge, potentially resulting in injury or death to occupants of your vehicle or other vehicles. Driving up to the bridge, we control whether or not we will adhere to the weight limit of the covered bridge. We must be committed to avoiding disaster, and it is our duty to know the weight of our vehicle and to not drive through the bridge if we have reason to believe our vehicle is over-weight.
Achieving financial independence, eliminating debt, resolving financial crisis, and recovering from financial strain must be important to us before we can make any meaningful progress. The decision must be assigned priority status. The power to avoid a catastrophe on the bridge rests in your hands.
As an example, some people may say that it is not possible in today’s society to live without debt. There may be some truth to that, but this type of thinking is essentially giving yourself permission to take on debt for the sole purpose of acquiring something you want. There are people who find a way to get by without debt, but the difference with them is that they have prioritized their money and decided staying away from debt was important. Ignoring sound financial advice may not have an immediate effect – the front wheels of an overloaded vehicle may not fall through the bridge – however, eventually there will be a problem, and progress will come to a stand-still.
2. Re-evaluating current financial habits. The second warning sign at the bridge is a speed limit. Provided our vehicle is within the weight limit and we control our vehicle’s speed at no greater than 10 MPH, we can safely pass through the bridge. No doubt when this bridge was constructed there were not many heavy, fast-moving vehicles on the road. However, structural engineers have determined that there is aesthetic value to retaining the bridge and that it remains safe provided our vehicles do not exceed a certain speed.
If our vehicle’s speed exceeds this limit, it is up to us to take corrective action to avoid a catastrophe on the bridge. Once we decide that eliminating debt, resolving a financial crisis, recovering from financial strain and achieving financial independence are important, we must make the changes necessary to turn our decision into a reality.
If I decide to run a marathon, I would first have prioritize my time to invest in training for the marathon and be diligent in adopting proper nutrition habits. To accomplish something we do not have now, we often must reorder priorities to ensure we obtain what is important to us.
A helpful place to start is working the financial decisions into our budget. Then, we have to determine an amount to insert in the budget that will help us make meaningful progress. Adjusting the budget will very likely require reordering priorities. Eating out, for example, may be one spending category we put on hold, so we can apply that money toward our financial goals. All priorities must be examined and reordered around the goal, and we must commit to the budget (i.e., spend only the amounts and in the categories listed in the budget). Ignoring this step is like speeding through the bridge – at some point the bridge may break apart.
3. Stay on track. Structural engineers are not needed to assess the bridge’s construction to determine the height restriction. Anyone can use a measuring tape to determine this information. However, it is helpful for traffic flow if the height limit is clearly posted. The height limit also serves as a warning to prevent damage to your vehicle and to the bridge, and warnings are often posted before the last opportunity for a large vehicle to turn around.
Let’s look at eliminating debt and easing financial strain as an example. Avoiding new debt is perhaps one of the most difficult areas to control. The car breaks down, a child is sick and requires hospitalization, the furnace suffers a catastrophic failure, and the list can go into infinity. Any number of major events can occur – and do occur on a regular basis – which threaten to undo our best laid plans at eliminating debt and easing financial strain. There are also events which are not entirely unexpected but which tend to wipe out budgets. These events are often overlooked, and no contingency plan was in place to cover the financial expense.
Let’s say you buy a house which needs a new roof in 10 years. After 9 years, the roof begins to leak. A contractor comes to your home and tells you a new roof is required. This is information you have known, but the roof replacement was not in your budget. To pay for the expense, the new roof is charged to a credit card, creating new debt. In this situation, the debt was avoidable, just as damage to the bridge is avoidable. Either plans should have been made to set aside money for a new roof fund, or the house should not have been purchased. Staying on track requires deliberate planning and fore thought, evaluating decisions before they are made as to the potential consequences on your financial goals.
If we know unexpected events will come, then they are really not unexpected at all. What we may not know is the form the event will take, but we do know unplanned expenses come. We also know – perhaps from experience – that unplanned expenses often come at a bad time financially. An emergency fund is a cushion between you and life to help protect the progress you have made toward your financial goals, and it must be part of your plan for your goals to work effectively.
Imagine the horror of the driver of a rented moving truck when the truck crashes into the bridge. The driver has been on this road many times before in his or her own vehicle – a passenger car. What happened? In a momentary lapse of judgment, the driver neglected to consider that the truck was too tall for the bridge. The driver is not accustomed to observing the height limit sign and neglected to check the truck’s height. Now both the truck and the bridge are damaged, and the damage was completely avoidable.
We need structural engineers to take crossing the bridge from a theory to reality. In the case of the covered bridge, the structural engineers do more than assess a bridge’s health and construction; they ensure the beauty and culture of the community is preserved by protecting the covered bridge.
Working with a financial professional from Zacchaeus Financial Counseling, Inc. is much like depending on a structural engineer to maintain the bridge. We can help you develop theories and formulate plans to reach your goals, but we do much more than develop theories. The financial professionals at Zacchaeus Financial Counseling, Inc. work with you to construct a sound plan which you can use to turn a theory into the reality of reaching your goals. Destroying a bridge is serious business. In some cases, a damaged bridge must be entirely reconstructed.
Your life and your financial future are exponentially more important. Contact us today, and let us help you safely cross the river of financial uncertainty.