Unexpected issues can derail savings
Don’t let those urgent needs keep you from reaching long-term goals
It’s still frigid in much of the United States, which of course means one thing — treadmills are getting their annual winter beating. Millions of Americans are running in place in basements, health clubs — even the ironically small rooms in hotels that are dubiously called “The Fitness Center.”
Minute after minute, mile after mile, runners are going nowhere. And no one has a problem with that because there really is no other option that doesn’t involve frostbite or more layers than a Super Bowl appetizer dip.
The “dreadmill” is the only choice for people who want to run forward. Yet the fact of the matter is sometimes it’s OK to run in place, no matter how defeated or frustrated you might feel.
As much as you’d like to relentlessly progress forward toward your financial goals and aspirations of stability and success, there are periods of your financial life in which you will go absolutely nowhere. Yet it’s OK. Your life, more accurately the events both within and out of your direct purview, may present you with a challenge that supplants your goals with your immediate priorities.
Do you hear that sound? It’s the sound of your furnace not blowing. Yes, you’re actually hearing silence. The problem is that your furnace should be blowing, and it will cost $6,000 to get a new furnace. You don’t have $6,000, and you’ve just started funding your primary financial goal, paying off your student loans, more aggressively. The interest rate on your furnace is about 7%, while your student loan rate is closer to 4%.
To compound the issue, the furnace loan is amortized over five years, which means the payments are relatively hefty compared to your recently increased student loan payment. Not only does this frustrate you, but it kills the momentum you’ve recently gathered.
As difficult as it might be to do, you need to be OK with your goal derailment. You have to see it for what it is. But more importantly, you mustn’t see it for what it isn’t — a failure. Sometimes the urgent expenses that pop up can last months and sometimes years.
Do you know who almost always runs on the financial treadmill? Parents of preschool children. As if there aren’t enough challenges with the cost of childbirth, raising a child, preparing for the financial difficulties, an ever-increasing college education, child care. From what I’ve observed and experienced, parents are spending well in excess of $10,000 a year for the five years leading up to kindergarten. Talk about running in place.
Getting frustrated is frustrating and feeling defeated is defeating, but there’s a bigger problem when your immediate priorities make you waylay your goals.
You can get lulled into complacency while you’re dealing with the now, which means you won’t necessarily jump back into funding your primary goal once your more immediate need subsides. It happens all the time, especially when parents are finally able to eliminate daycare expenses. Somehow, someway the
money once allocated to- ward a goal, which then was reallocated toward an urgent priority, all of a sudden gets reabsorbed into a lifestyle expense when the temporary expense ends.
There are two particular pieces of wisdom to discover within the problem. First, don’t get so frustrated by the urgent expense that you beat yourself up over something you can’t necessarily control. Young families do this frequently with child care expenses, as does anyone dealing with significant medical bills.
Could you have done something to prevent the seemingly involuntary expense? Arguably. But it certainly isn’t worth arguing about now. Get through the expense with your eye on the last payment.
Which brings us to the second point: Take immediate action the very second your immediate expense is finished.
You need to recapture your money every step of the way. New parents should recapture money when the days of formula and diapers are left behind. Take that $150 a month and re-engage it with the goals it was once married to. And when day care costs end, slap that $1,000 a month back to your goals, immediately. Don’t take a breather. Don’t think about it. You’ve just made your way off the treadmill. Run.
The fact of the matter is sometimes it’s OK to run in place, no matter how defeated or frustrated you might feel.