Why we’re sabotaging our financial plan (by traditional definition)

April 13, 2019

Ask any CFP® Professional what one of the most important principles of financial planning and working towards financial independence is and they’ll probably tell you it’s a combination of two important variables: (a) start savings as soon as possible and (b) let your savings habits dictate your spending habits.

Don’t get me wrong–I subscribe to the same principles and philosophy. My grandparents taught us grandkids three very important principles that, when done in order, give most anybody the best chance of having a successful and fulfilled life:

  1. Work hard and bust your ass for your family. Don’t expect anything to just be handed to you. If you want something, work for it.
  2. Pay off your debts in a timely manner. Let your savings habits dictate your spending habits and make sure you think of yourself as your biggest liability.
  3. If you’ve done #1 and #2, you’ve now earned the privilege to have nice things and spend the rest of your money as you wish.

My experience as a planner has shown me that a lot of people live life by 1, 3, and 2. Most everyone works really hard. However, a good number of people let their spending habits dictate their savings habits and I have yet to work with one successful, financially-independent client that said the way they accumulated their nest egg was they just saved whatever was left over at the end of the month. We’re inundated 24/7 with corporations that spend billions of dollars to get you to emotionally connect with their product and service and entice you to part ways with your dollars.

As a family…and as humans…we’re no different. So how are we sabotaging our financial plan?

My wife and I decided that she’s taking a break from practicing optometry and enjoying a new role that she’s discovered over the past four years: being an awesome Mom to our two little girls (ages 4 and 1). We don’t know what the next chapter of her professional career will be or when it will begin, and that’s ok. Initially, we’re planning that she’ll take the summer off and possibly go back once our oldest (Brooklyn) goes to kindergarten in the fall, which means a 4 or 5-month break.

She hadn’t been happy working for her most recent company for the past couple of years. She was coming home exhausted mentally and emotionally every night. From the time that she got home until she left the next morning, she basically just went through the motions with us. The company that she worked for fits the classic corporate definition of “more is better.” Between pre- and post-op consults (she worked in a LASIK-only practice), it was not uncommon for her to come home after having seen 30+ patients per day. Her record was over 50. Handling that pt load, while high, was manageable…but the top-down, micromanaging scrutiny from home office on getting “the almighty sale” is what ultimately got her to the point of saying “enough’s enough.” When corporate sales-driven initiatives start interfering with clinical decisions and you have non-clinicians at a home office starting to dictate how you practice and what your tx plan should be…I don’t know many ODs that would enjoy that environment.

She’s done. I’m done. I want my wife back and I want her to enjoy this time with our daughters.

In the back of our mind, though, Grandma and Grandpa’s lessons are whispering to me. We’ve done everything that we can to prepare for this transition, and we’ve been preparing for the past year and a half. We’ve basically been doing a variation of “starving and stacking” over the past 18 months. When we did the math on what my wife was bringing home net of taxes and daycare costs ($29,640 per year), we’ve pretty much used her net, after-tax salary to (a) pay down student loan debt and (b) build a very healthy emergency fund.

However, here are the three biggest adjustments and “hits” that we’ll be taking with her staying at home:

  • I’m self-employed, so she carried the benefits. We now have to pay full freight for health insurance. I share those details here.
  • We’re not making as much progress on aggressively paying down her student loans as we were previously.
  • She’s no longer maxing out her 401(k) and thus we’re losing that future wealth-building tool.

I don’t care.

It may sound blasphemous for a CFP® to put that in writing. If some of my colleagues read this, they may shun the decisions because of the financial implications of the decisions.

In my opinion, though, that’s a very myopic view of life. Life is more than a net worth statement. It’s more than earning a paycheck. It’s more than having a company subsidize part of the cost of your health insurance. It’s more than building up your 401(k)

It’s about understanding that we only have one shot at this life. The greatest commodity and most precious resource that we have is time and it’s what we do with that time each and every day that dictates the return on our life.

If I run the math on our own financial plan and take away my wife’s contributions into her 401(k), it has a pretty significant downward impact on our long-term net worth. I also know that, because we’re not paying down her debt as aggressively as we could if she was still working that we’ll be paying more in interest on her student loans.

But our little girls will only be this age once. Anyone that has kids will tell you that, at the age that our girls are right now, every_single_day is a new day with a new experience and new discovery. A new word is said. A new gesture is learned. A new connection is made. A new expression is shared.

If Andrea was still working, all of those experiences would be witnessed by someone else in a daycare environment…and for what? So that we could pay off her debt that much faster? So that we could grow her 401(k) quicker and have more money saved for retirement? So that we could buy more “stuff” that we don’t *really* need?

Financial planning is about balance. It’s about determining what you want your quality of life to be today while also understanding the quantity of dollars you have at your disposal and making those dollars work for you in the most efficient way possible…now, and in the future.

You may be reading this and thinking that the decision we made was a very expensive decision and that she’s foregoing a lot of income and future wealth building, but I’ll respectfully disagree based on two premises.

First, I believe that my ability to grow my practice can provide a stronger ROI (return on investment) than anything that I would be able to earn in the markets, and I believe that to be true for any business owner, including optometric private practices. Run correctly and grown consistently, the ROI on one’s small business can be the seedlings that can then, in turn, be used to fill the other buckets (like retirement accounts, college funds, etc.). Andrea’s retirement accounts weren’t the ONLY accounts that we have going; I have my accounts in my business as well.

Second, no amount of money can buy this time in our lives of being a parent and having Mom at home back at some point in the future.

I don’t think of this decision as being expensive.

It’s priceless.

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