Amidst the shouting, cheering, rants and platitudes of the last two political conventions-one message –one word stood out for me-arithmetic. Regardless of your political leaning, the concept of arithmetic in your personal thinking, believing and acting must be in the forefront. The fact is, you will either benefit from or suffer from the results of your actions.
For example, if you are a recent college graduate fortunate enough to be employed, you might be given the opportunity to contribute to your companies 401(k) retirement plan. If you are a typical young twenty-something, your eyes might glaze over at the thought of taking money from your salary for your retirement. It feels so far in the future that it seems unreal, unreachable and totally unimportant-at this time of your life. But do the math, if you are twenty-three years old and contribute $50 per week into a retirement plan, at age sixty-seven, assuming an average return of 6%- you will have approximately $520,000. If you wait until you’re thirty to begin, your benefit shrinks to $330,000.
I recently met with a couple wanting to buy a vacation home. This purchase was extremely important; in fact, it became their personal mantra. They could see themselves at the beach, entertaining friends and family. They entered my office on a cloud of hope and expectation, stating that with interest rates so low, this was a perfect time. I began asking questions, such as, the cost of the property, the cost of the taxes, the amount of mortgage they expected to carry, the cost of utilities, repairs, maintenance, additional cost of insurance, cost of furnishing. Pretty soon the numbers began to portray a picture that turned the puffy white cloud to gray and foreboding. I watched as their spirits sank in a pile of numbers that they hadn’t considered. It just wasn’t doable now; or at least until they were able to better provide the cash flow necessary to support this costly endeavor.