Newsletter Introduction
By Chris Cassidy
DECEMBER IS A DIFFICULT TIME of year for me. I have no issues with cold weather and short days, but I am one of the world’s worst gift givers. I view myself as a generous person, but gifts make me uncomfortable and as a result I procrastinate.
When it comes to holiday shopping, I never do any advanced planning, always wait until the last minute, and then can never seem to find anything suitable for my loved ones. This horrible cycle repeats itself year after year. Thankfully, my wife is excellent in this area so our daughter will have plenty of exciting items under the tree, despite my shortcomings.
When something makes us uncomfortable, we tend to ignore it and hope that things will magically work out. This of course rarely ends well. For many people, it is money and finances that make them uncomfortable. This discomfort is understandable as personal finance isn’t taught in school, and many areas of finance seem extremely complicated.
While the world of finance may seem complicated, making sound financial choices is more about planning ahead and being disciplined than it is about being extremely intelligent. The concept of paying for college is a scary thought, and if I ignore it until my daughter is eighteen years old, it probably won’t end well. However, opening a 529 College Savings Account is about as easy to do on-line as shopping for gifts on your favorite retail website. $5,000 contributed to a 529 annually earning 8% grows to $202,231 after eighteen years. It takes some planning and discipline to open the account and save the money, but the result is a lot better than ignoring the problem and hoping it will magically resolve itself.
Saving for retirement requires similar planning and discipline. According to the Federal Reserve, the median retirement savings in the United States is only $185,000 for someone aged 55-64. As Chris Lafayette’s article Million Dollar Cup of Coffee illustrates, you can achieve a far greater retirement nest egg than the median person with some advanced planning and a small amount of disciplined savings each year.
At Trust Company of Vermont, we are often asked by clients what they, their children or their grandchildren should consider when making smart financial choices early in life. Sofia Menyalkin has written a great article about financial choices and what to prioritize.
I would advise everyone to make this year the year when you tackle those uncomfortable financial items. Your future self will thank you. Oh, and if you are paired up with me in a gift giving pool, I advise you to draw another name. Otherwise, you may end up with toenail clippers, fruit cake, or cleaning products.