By the time most of us receive our first full-time pay check there is no one to tell us what to do with it. With “Freedom!” in our hearts and VISA in our wallets we’re thrown into the financial lake to sink or swim on our own. The result: record levels of debt, bankruptcy and foreclosures.
Even if we figure out how to stay afloat, most of us miss thinking adequately ahead to purchasing a home, college for kids and the day when we no longer receive a full paycheck. And although we have more tools than ever to track our money and the market, economic uncertainties make it harder to know what to do.In our 40’s and 50’s we feel more acutely the need to do something (even if the surest fix is best done in our 20’s and 30’s).
Recently I’ve had the privilege of working with FBC elder John Davidson, a Registered Investment Advisor, who is offered three free financial tune-ups at FBC in January 2011. John has an amazing track record of helping people with actionable financial advice for tough, real-world dilemmas: how to balance conflicting demands like credit cards, retirement investments, mortgages, college fund, insurance and living expenses.
As former Executive Vice-President of Columbia International University and for the last ten years as an Advisor to over 500 clients (and many who are not), John has helped a broad range of people, from struggling students to wealthy donors. “The three pitfalls that tend to ensnare most people are too much house, too much on charge cards and too much car.”
John Davidson’s Take Charge Tips:
- Borrowing: Borrow the least amount you need For the shortest time Not on impulse
- House hunting: Do not look at what you cannot afford
- Wills: You need a will (if you don’t the state has one for you!) You need to name a representative, guardian (for minor children), and medical directives
- Retirement: Plan and save NOW. Accumulation means everything. If you are near retirement and have not set aside adequately, do not highly risk your investments
- Insurance: You have different needs at different stages of life Provide basic coverages while you are healthy.
To the people complaining of “frugality fatigue” in a recent Newsweek John says softly, “I would like to introduce them to people who have credit card debt three to four times what they make, real human beings who thought like they did and now are devastated. Nobody’s going to like you better because of that car you bought. For smaller items that are not really necessary make an “Impulse List” and give yourself a week or two to think about it.”
As former Executive Vice-President of Columbia International University and for the last ten years as an Advisor to over 500 clients (and many who are not), John has helped a broad range of people, from struggling students to wealthy donors.
John cautions those in their 20 and 30’s whose budgets are pretty tight and for whom retirement looks forever away–it makes a huge difference if they start saving now. “This is a big thing, a habit to be formed, a discipline. Eighty percent of the people I deal with didn’t start to plan and save until their 50’s. At 7% money doubles every 10 years. Every time you get a raise you should save a little more. A modest number to start with is 5%.”
For those who waited or saw their retirement shrink considerably in the economic meltdown, John advises, “Do something! Some are like deer caught in the headlights. And yet the answers need to be very individualized. Be in the market wisely. Some can deal with market risk, some feel extreme caution now. The sleep factor is what I’m looking for…What can you do and go to sleep at night? It would be a big mistake to try to recover too quickly by taking too much risk.”
One of the greatest joys of helping people with their money has been seeing tangible results. John recalls helping a young man in the military whose wife wanted to quit her job and stay home with their children. They came up with a plan for him to pay off his house and, sooner than expected, his wife was able to be home while the children were still young. Another man built apartments that attracted many CIU students. Davidson helped him construct a charitable trust that would provide income for himself and his wife after him and then be given as a gift to the college.
Most rewarding has been helping those who are financially underwater, drowning in debt. A young student and his wife came to John for help. Every month their bills substantially exceeded their income. Even though they were living modestly they couldn’t handle their payments on their car and mobile home. Their steadily growing debt stressed their marriage and threatened their future. Looking at the equity they had in their car and home John advised, “If you sell your car you can buy a car with your equity and have no payment.” Within two days they had traded down on cars. Then they put their mobile home up for sale. It sold in a month and they rented a cheaper place to live. Within a short time they were living totally within their income.
While John thinks financial security is a reasonable undertaking he believes it should not be the ultimate goal of what we do with our money. For one thing the feeling of security is elusive. For many when it comes to money there is never enough. “Security is not the goal,” John advises, “The goal is: You’re a giver. Not a taker. If security is the goal you’ll never have enough to become a giver. If God is telling you to give he’s got you covered.”