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.

Another couple, with whom we’ve worked for years, recognized that based on their cost of living with two children, home, cars, etc. would be unable to completely prefund their children’s college education.  However, with careful planning, they are in a position where their mortgage is paid off the year before their oldest child goes to college, thereby having available cash flow to pick up what they were unable to prefund.  Meanwhile, their retirement plans are fully funded each year; they have rental property that provides a small amount of positive cash flow.  They have carefully thought out each step in advance-even providing a healthy emergency fund for unanticipated expenses or opportunities.  Every time we meet, they demonstrate how carefully they watch their expenses, income and progress of building their wealth.

Regardless of your life stage and challenge, a thorough understanding of your numbers are vital to your success.  Financial success is not about picking the right stock, buying property just because rates are low, or even living a miserly existence-it’s about knowing what you want, looking into the future, harmonizing your dreams in reality, living a balanced life and paying careful mind to ARITHMETIC!

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