Money – Cause & Effect and Pictures
Image sourced by Morgan Housel @morganhousel
Welcome back!
One of the most popular Budget and Grow Rich® blog post series has been ‘The Bank of Dad’ which you can grab here.
I call your attention to Part 4 – about my children whom I love dearly – and whether it’s prudent for parents to cover their adult children’s living expenses. And when is ‘enough’ enough.
My children are truly great people but sometimes I scratch my head and think about the expectations they seem to have. No doubt my parents scratched their head about my brother and me now and again. . .
In Part 4 of The Bank of Dad, I described when my son was enrolling in law school and asked me for money to help him cover the tuition. His mother and I helped Mike V with college and my mother had left him some money when she died which he ultimately used to fund part of his college costs.
Mike V. ‘guilted’ me into giving him some money, more than I wanted to contribute.
I knuckled under to his pressure and gave in. I guess that’s our pattern. And how my eX and I treated him. After some discussion and his cajoling, I accelerated the amount I had planned to give him over the three years and gave it to him all upfront.
He’s 27, an adult by most people’s standards. . .
My giving him the extra money upfront – let’s say it was $5,000 – meant I would have Less money in my investment accounts to build wealth for retirement and have to postpone my retirement date by one month or more.
Turns out that $5,000 is roughly the amount of money after taxes that I project I will need to cover one month’s living expenses in retirement.
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I think the relationship between spending; and saving and investing is clear to all of us that follow Budget and Grow Rich®.
Upon further reflection, maybe I could have given Mike V. a better grasp on the concept of cause and effect of my giving him more money up front.
As my Dad used to say, “A picture is worth 1,000 words.”
It occurred to me that a more concrete analogy for Michael would have been a picture, a visualization.
In effect, giving Michael $5,000 today meant that I would have $5,000 less in my retirement accounts and therefore would have to work at least one more month before I retire.
Cause and effect.
Money versus retirement.
So. . .
$5,000 = one month’s retirement expenses.
Again, having $5,000 less in my retirement and investment accounts means that I have to work at least one more month before retiring.
Wish I had said that to Mike when he was ‘pushing ’ me to contribute more money for law school. Although ultimately he did thank me for my contribution.
Turning this concept to you and Your quest to build wealth, when you set a financial goal, convert the goal into a picture – a concrete 4-color image that you can see, touch, taste and feel.
Suppose you want to retire and take a whirlwind tour of Tuscany. . . and the trips costs $10,000.
Every time you reduce your spending and work a few more hours to earn more money and save money for your trip, you get one step closer to purchasing your airplane tickets to Tuscany or saving more for retirement or a new house or whatever. . .
For me, giving Mike as I mentioned above, giving Mike an extra $5,000 means I have to work one month longer – retire one month later. . . since I will have depleted my retirement savings by the $5,000.
Cause and effect.
To help you achieve your goals, create a visualization, an image.
That works for You!
And motivates you to take action to save money, reduce expenses and so on!
I’m sure you get the picture [sorry]!
Mike V., how about you. . .
See you next week,
Arthur VanDam
P.S. To Save More Money Every Day – click here.
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Disclaimer: OH and Please Remember, we are Not financial advisors, financial planners, attorneys or accountants and are Not providing any specific financial, tax, accounting or legal advice here. Be sure to conduct your own due diligence and consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances, risk tolerance, time horizon and investment goals and objectives among other key factors!
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