Retirement Reality Bites: It’s Time To Bite Back

By September 16, 2014Retirement

Retirement Reality Bites 09 16 2014According to a poll (click here)  36% of Americans of all ages have not begun saving for retirement—including a rather shocking 25%+ of the 50-64 year-olds surveyed.

Of course there are many uncontrollable reasons why people are financially unprepared—losing their job to the recession, an obsolete skill set, disability or runaway medical expenses.

But there are many CONTROLLABLE factors, that are not self-created, but self sustained. Like how we think about and deal with money—your money mindset.

Your beliefs about money are set in childhood—from healthy, responsible messages and values to broken and destructive ones that create disastrous behaviors. It’s the “broken” money mindsets that can get you into trouble and put you firmly in the 36% or, worse still, the 25%.

There are those who grew up where parents never talked about money. The result is an “Avoidance Mindset” that basically says, “ I don’t know anything about it, therefore, I am just going to ignore it.  Avoiders get into trouble by their own inability to understand and get involved with handling their money. 

And then there is a mindset born from growing up in a household where money was the source of conflict: “Anxiety Mindset.” This shows itself by setting off anxious feelings whenever the subject is broached—our current feelings are anchored into something from the past that triggers our behavior. Those with an “Anxiety Mindset” have great difficulty talking about money or dealing with it in a positive way.

We all know someone suffering from the “Vanity Mindset,” or those who learned that it’s all about the show—the impression of wealth. Those caught in this vortex are constantly trying to demonstrate their success, rather than actually taking active steps to ensure their security. They are the victims of peer pressure and their belief that the judgment of others is what matters most.

And then there are those who come from a “Magical Money Mindset”, somewhere between being overly optimistic and some faith-based thinking that it will all work out—that God or fate decides, without their getting their hands dirty. Gamblers and lotto players who believe they will win big and wind up flush fall into this category. Magical money thinking deludes us into fantasy about what it takes to become financially secure.

Suffer from any of these dysfunctional mindsets? No need to despair—this is recoverable. Just make right now the time to take stock and begin to make some small changes. Here is a short list to help you on your way.

  1. Determine whether your money problems sprang from the uncontrollable or controllable side of the ledger.
  2. If uncontrollable, consider whether you are in need of retraining, career counseling or debt relief.  Seek out the appropriate professional to help you with a direction.
  3. If controllable, think about which money mindsets you have been carrying with you like baggage from a long-completed trip. You’ll need to examine your beliefs and acknowledge that they don’t serve you—and then create a new mindset.  Try: “I deserve to feel comfortable and secure” or something that provides you a positive message to help you through the inevitable bumps. After all, you don’t replace decades of broken messages overnight.  You might also seek the help of a therapist who can help you work this through.
  4. Take serious stock of your financial situation. Take out a pencil and paper (there is something about the physical act of writing this down that tends to make it real) and write down your assets, and your liabilities (what you owe) in detail.
  5. Then record your earnings or sources of income, and all of your expenses, from the mortgage or rent right down to your lattes and haircuts. Divide the expenses into two columns—fixed and discretionary. Fixed expense—your mortgage, loan payments, etc.—are your structural spending. Everything else is discretionary. Yes, even your grocery bill has a degree of discretion to it. For example, you can buy a generic instead of a name brand and save some money. It might not be a lot, but multiply those savings by each week, month and year and see how it can make a difference.
  6. Once you have examined your spending, see where you can make cuts that aren’t amputations. Start small. If the problem is significant, your changes in discretionary spending might not be enough.
  7. If so, then you need to look at Structural spending. Maybe selling your home and buying one in a less expensive area, or moving to an apartment with lower rent.
  8. If that’s not enough, then it might be time to look for a second source of income.

Once you have made changes that produce savings, you need to capture each amount—no matter how small—into an accumulation account. It might feel like filling a bucket with an eyedropper, but the consequence of NOT taking these actions is devastating for everyone involved.

Money security, in most cases, is a choice. It requires the right mindset and consistent actions. Like learning a craft or skill, time, patience and devout determination is required, most especially if you are starting from a difficult position.

Positive change can happen—not by avoiding or ignoring or trying to prove your success to others or by magic. Many have been “victims” of destructive mindsets; perhaps it’s time for the victims to fight back.