A friend recently remarked that most people don’t seem to have a plan when it comes to their finances. Having done no formal survey on the matter, I can’t say whether most don’t have a plan, but certainly many don’t, and there are probably multiple reasons for that. But rather than explore those issues, I will focus on what can be done to correct the situation.
First, it has to be understood that financial success is much more likely with a plan than without one. But I think that it is right here that many people miss the boat. Since this topic is not taught in high school (at least it wasn’t when my kids attended), I have to believe that many of the people without a plan simply have no idea how to create one. That leaves basically parents, colleagues, or doing research.
Since many parents themselves don’t have even a rudimentary plan, that is not an option for many young people. And of course, even when parents do offer sound guidance, many teenagers will ignore it, especially if it doesn’t fit with their “right now” mindset.
A respected colleague could certainly help, but most of those are probably in the same boat. Which brings me to another possibility, a mentor. We all know young people just starting out in the job market that are in need of financial advice. It is my job to help those I come in contact with, but you, as a boss or employer, can take someone under your wing, so to speak.
When my son was stationed in Iraq, he was fortunate enough to be in a unit with a gunnery sergeant who did just that. Once a week, Gunny held voluntary classes on saving and investing. He taught them about mutual funds and Roth IRAs, and introduced them to Investors Business Daily. Eight years later, my son has a very solid foundation.
I’m amazed at the number of young people I meet who aren’t even participating in their employer’s 401(k) plan. Didn’t anybody tell them that they are leaving free money on the table? Sure, some of it gets back to what I said a few weeks ago about delayed gratification, but still.
Credit cards, budgeting, life insurance, retirement plans, mutual funds, student loans, mortgages. Can you see what an advantage a young person who had at least a fundamental knowledge of these areas would have?
Sure, buying life insurance while you’re young is important, but learning the principles of budgeting and compound interest are every bit as important. Put them all together and you have a sure-fire recipe for financial success.
So do you know a young person that could use some help in the financial knowledge department? Offering to mentor that person could really help him/her, even if it’s not on a formal basis. Because everybody needs a plan.