Mark Gungor is a popular marriage conference speaker.
In one humorous presentation, he explains the different ways men and women think. Women, Gungor contends, think in a very global, integrated, complex way. Their thoughts and feelings constantly interact together.
Men, on the other hand, are much simpler. According to Gungor, we males think in separate “boxes” or categories. We have a work “box,” a play “box,” a marriage “box,” etc. (We’re not proud of this, ladies, but you won’t find many men who will deny it.)
And yet, when it comes to money, my experience in four decades of working with couples is that the sexes tend to think alike. Most men and women think in boxes, or categories.
In fact, the whole financial services industry has organized itself around this “box” principle.
- Do you want to retire one day? Simply put your money in a “retirement” plan, such as a 401(k) or a Roth IRA.
- Do you want to buy a car? Go get a “car loan” from your bank.
- Do you want to pay for your kid to go to college? Start stashing money in a 529 college savings plan.
So simple. And oftentimes, so wrong.
The box approach would work great if we each had an unlimited supply of money. You could put, say, $5,000 a month in each different “box” without having to worry about not having enough.
But we don’t live in that world. We live in a world of limited resources—and unlimited desires. So, we first have to make sure our priorities are wise. Then we have to be efficient and disciplined with every dollar.
Take “saving for college” for example. How do we avoid “box” thinking there?
Consider what the flight attendant says when he/she reviews “the safety features of the airplane.” There are always instructions about what to do if the little yellow oxygen mask drops down from the overhead compartment. Remember? “Place the mask over your own nose and mouth first, THEN assist any children….”
The idea is that if you aren’t able to function, you won’t be much help to your kids.
That’s not just true in the friendly skies; it’s also true on the ground…with money. You have to prioritize with the overall picture in mind.
So, before you thoughtlessly embrace the “box” of “Let’s just throw some money in a 529 plan,” consider adopting the following priorities:
- Get your own safety net in place. If a catastrophe happened to you, your dependent child would suffer as much as anyone. So, make sure you have adequate insurance.
- Get liquid. Work towards having three to six months’ worth of living expenses in an emergency savings account. That means you’re going to have to…
- Get busy saving. I recommend saving 15% or more of your annual income. If you are now at zero, try starting at 5% of annual income. But start somewhere.
- Get out of ‘The Debt Trap.’ Some people (small businesses, real estate investors, etc.), use debt judiciously to build wealth. Nothing wrong with that. Just make sure your use of debt is part of a wealth building plan, not because you didn’t save any money and wanted a new car. Steer clear of the consumer debt trap.
- Get growing yourself. Are you investing in your own professional or career development? Are you spending any time or money to make yourself more valuable to your clients, customers, and/or employer?
Want to send your child to college and be able to pay for it? Great idea!
But I suggest you first resist knee-jerk “box” thinking and make sure the above priorities are firmly in place.
By the way, the same principle applies to retirement. You don’t want to get there and realize “I followed box thinking—and now I don’t have a plan for turning my retirement assets into regular retirement income!”
So, let me offer you this: I’ve got a free (and fascinating) little “test” that can help you see in minutes what kind of retirement income plan would best align with your own unique personality. Email me at bmoore@argentadvisors.com and I’ll send you a free link.
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