The future presents a plethora of questions and uncertainty, but structuring and planning for the what-ifs in life can bring about financial peace and stability.
Financial planning is often associated with the wealthy, but, in truth, everyone benefits from a more organized life before and after retirement.
Financial planners and teachers believe budgeting and planning for the future should start as early as possible, which is why high schools across the nation are ramping up business curriculums.
“You’ve got to at least have an idea of what money’s coming in and going out, so budgeting is probably important for everybody,” Brandon Kirkland, Lenoir City High School business teacher, said. “With these guys being seniors, they may not have ever been introduced to that. They may not see it at home either because that may be one of the reasons America is in the financial problems we’re in. Trying to introduce it to them so they can get an idea of what budgeting looks like early, I think, is important, too.”
A popular financial planning methodology utilized today is Dave Ramsey’s Financial Peace course, which lays out simple and effective ways to budget, save money and build wealth.
Lenoir City and Loudon County schools both teach Ramsey’s method. Opinions have differed over the years regarding the approach, but most experts tend to agree with a majority of what he teaches.
“Probably the No. 1 thing we’re trying to get through with Dave Ramsey is trying to avoid debt at all costs,” Kirkland said. “Dave Ramsey’s a big believer about not taking out loans. I don’t completely agree with him because he says, ‘Don’t take out a loan for anything.’ I don’t think that’s realistic because most Americans have to get a loan to get a house, and we tell the kids that upfront. I tell these students, ‘I don’t agree with everything he says, but a lot of his principles are really good.’”
Jeff Harig, Loudon High School personal finance teacher, strongly believes in Ramsey’s methods.
“There’s three levels — you’re supposed to save three to six months for an emergency fund, you’re supposed to be saving and investing money for wealth building and retirement and then the third step is saving to buy things with cash,” Harig said. “That way, you can negotiate a better a deal and stay out of debt. It’s easy to understand, it’s presented in an orderly fashion. To me, Dave Ramsey does a good job laying out healthy behaviors, what things you should be doing. If you want to be rich, do rich people stuff.”
Ramsey’s program is comprised of seven baby steps, which include putting $1,000 in a starter emergency fund, gradually paying off debt, saving up to six months of expenses in an emergency fund, investing 15% of household income in retirement, saving for a college fund, paying off home mortgages early and giving back.
American household debt exceeded $23 trillion in 2019, and the average debt for ages 35-64 is $125,333. Financial planners encourage clients to avoid as many debt factors as possible.
Tim Fuller, an Edward Jones consultant for Loudon County, often educates clients between “good debt and bad debt.”
“We definitely want to recognize that it is bad … typically, the mortgage is considered a good debt because we need to live somewhere,” Fuller said. “What I’m commonly seeing these days are car payments. Our car payments are getting ridiculous. There’s people out there that pay for their car payment what people used to pay for their house 10 years ago, and it’s like it’s becoming more socially acceptable to have these higher notes because we want these cars with all the new gadgets and gimmicks. But I would say just be mindful and careful that we’re not jeopardizing our future because we want the newest and greatest of cars … they’re really getting out of hand.”
The most misplaced aspects of a budget are giving back and allocating a certain amount of personal finances for enjoyment.
“The smartest thing to do is to, and from a spiritual perspective, we’re supposed to give 10% back to God and a lot of people really, firmly believe that’s what they should do,” John Evans, Citizens Bank branch manager in Lenoir City, said. “You should also give 10% to yourself, at least. You should put back 10% of your income for your future. You should put back 10% of your income for retirement. If you can’t save money for yourself, if you can put in your budget 10% for yourself, 10% for emergencies and another 10% of money you can’t ever touch for retirement, then you’re spending too much money.”
Saving for retirementRetirement is often an afterthought in the minds of many, especially younger generations, but it is one of the most important investments one can make.
“It’s incredibly important because the fact is if things don’t change, Social Security will be broke in the next 30 years,” Evans said. “If that’s not something you can depend on, where are people going to be? If they start having to limit how much Social Security they give someone, and as it stands right now at retirement, I’d make $2,400 a month in full retirement. Well, that’s not going to make a house payment and a car payment, so I’ve got to have all that stuff planned out. You need to plan to have your home paid for well before you retire, you need to have plenty of money in savings, plenty of money in IRAs or 401k because if you don’t, you’re going to have a sad retirement.”
Fuller encourages clients to begin planning for retirement as early as possible.
“The best time to plant a tree was 10 years ago so that way today we’re enjoying that shade, but the second best time to plant a tree is today,” he said. “Start somewhere, start now, I mean, even if you’re worried about if you don’t have enough, we can’t do anything about the past. I can’t back up and give you more time, but we can start where you are today.”
There are several retirement plans to choose from, ranging from an employee-based 401(k) to a variety of individual retirement accounts. Roth IRAs are popular since withdrawals are not taxed.
Harig recommends students and young adults start putting away at least $100 a month in a retirement fund to kickstart the process.
“If you could sell and buy time, what would it be worth, so I really try to impress on them for just as little as $100 a month, you can buy a million dollars of wealth 40 years from now,” he said. “If you do it right, you can retire with your money being more valuable than you are as a worker. You should have three forms of income when you retire … everybody qualifies for a work-based retirement plan as long as they stay long enough, so you have your 403(b), your 401(k), your 457 or if you’re self-employed, you can put money back that you make from your business. If you do things little by little, after time, you can get there.”