A lot of people decide to focus there attention in finance towards the benefits of good financial habits and correct investing. While these items are always important and do play a roll in financial success, I would suggest that the major factor in financial success comes from avoiding potential land mines along the journey towards your financial goals.

In this post I will briefly discuss the 9 financial land mines as discussed in Patrick Kelly’s book: Tax Free Retirement. You will find this article broken into 3 parts. This will allow us to delve into more details around each Financial Pitfall.

Landmine #1 – Lack of Planning

How do so many American’s find themselves approaching retirement without the necessary funds to properly retire? Who is at fault? How do we solve this problem? We are so busy, that few people take the time to ask these very important questions. When professionals attempt to ask these questions of us, we brush them off as being pushy or selling us on something that isn’t relevant. Since when have you actually contemplated the following questions: How much money will I need to retire? What does retirement look like for me? How will I handle the risk of outliving my retirement savings? What is truly important to me in retirement and what am I willing to sacrifice to obtain this?

Most people give their attention and effort to how much they are going to spend, not to how much they are going to save. Or if they do save, their only plan is to sock away whatever is left over after all the bills are paid. The problem? There is never anything left over – regardless of whether the person is making $20,000 or $200,000. Without a plan, it ALL gets spent. ~Patrick Kelly – Tax Free Retirement

Maybe you find yourself loosing this battle of saving money. You might ask yourself, “Where do I start? It is so overwhelming!” The answer is simple: Build and Implement a practical and workable plan.

• Step 1: Set a Goal
• Step 2: Pay Yourself First
• Step 3: Start today and be consistent

Landmine #2 – Procrastination

Of all the things that I personally struggle with the most it is this landmine, Procrastination. Time is the largest factor in creating a large enough nest egg for your future and the legacy you might want to leave. This can be easily illustrated with the story of the purchase of Manhattan Island.

“In 1626, Native Americans sold what is now called Manhattan Island, New York, to white settlers for a pile of trinkets worth only $24. Manhattan’s value as real estate is now appraised at $23.4 billion. But if the Native Americans had sold those trinkets for $24 cash and placed the money in a 6% compound-interest account, their investment would now total $27,600,000,000. And if today’s Native Americans had inherited this fortune, they could buy back Manhattan and still have over $4 billion left in their account!” (Weldon, Joel The Unlimited Times)

Let’s ask ourselves a question: If you wanted a nice large oak tree standing in your back yard, when would be the best time to plant it? The answer is obvious, hundreds of years ago. If the tree was never planted when would be the best time to plant it? You got it! TODAY!

Before I introduce you to the powerful investment vehicle that will allow you to build tax-free wealth. If you don’t have this foundation in place, you could easily step on one of these hidden explosives and find yourself financially crippled. ~Patrick Kelly – Tax Free Retirement

Landmine #3 – Getting on the Wrong Side of Mr. Interest

I get the privilege of working with many different business owners. Some are highly successful, others will never truly succeed. Some are productive, while others are highly in-efficient. Some present themselves as extremely professional business men and women, while others seem to think the business world is a game that can be played whenever they like. But one common denominator I’ve found in every business is this – employing good quality, faithful workers, who contribute to profit, is essential.

Employing Mr. Interest to work for you is like hiring a person to come into work, make you money, but never accept a paycheck. On the other hand, hiring Mr. Interest to work against you is like paying an employee every day of the year (including weekends and holidays) to run your business into the ground and give all your profits away to the competitor. ~Patrick Kelly – Tax Free Retirement

Let’s say you choose to purchase the dream boat for you and your family to build lasting memories on. And let’s say that this boat’s sticker price is $43,000. If you obtain a 7.75% loan for the next 10 years your payment would be roughly $520 per month. I’m not a huge boating fanatic, but I do know that it costs more than just the monthly payment if you plan on enjoying the boat. If you add in maintenance, fuel, and insurance the payments would round out to about $800 per month. By doing some quick calculations the total cost of the loan would be $62,000 (with interest) with an additional amount in expenses at $33,600. Bringing the total 10 year cost to $95,600.

Maybe this expense is worth it to you, but let’s look at Mr. Interest working for you instead of against you. Let’s take the same $800 per month and save it into an account earning compounding interest. What percent sounds good? 6%? 8%? 10% (If you don’t think that these are reasonable then maybe we need to chat.) Here are the account totals after 10 years at the given percent.

• 6% – $131,103
• 8% – $146,357
• 10% – $163,876

If this is surprising to you now lets look at what the cost of these accounts would be if these number where left alone for retirement – 20 years later with no additional contributions.

• $131,103 turns into $433,977
• $146,357 turns into $719,835
• $163,876 turns into $1,200,895

Spending $95,600 is costing you $1.2 million. WOW! I share this story and analogy simply to illustrate the incredible power of compound interest and how much it can cost you to be on the wrong side of our friend or foe, Mr. Interest.

As we dig into the next three financial land mines I ask one simple question. What is the one thing that you can be doing right now to better prevent you from walking into one of these land mines. Once you identify this, take action! An idea without action is just a wish. An idea with consistent action creates our future reality. One way or another. Good or Bad! I truly believe that most of the battle to achieve financial success is rooted in preventing you from blowing up the financial plan by stepping on one of these land mines.

Stay tuned for the next post which will cover the following: Desire for Instant Gratification, Following the Masses, and The Inertia Factor.

Colburn Financial ®Mike Colburn Financial Planning Specialist 1084 West Oakland Ave Johnson CIty, TN 423-930-4021 [email protected] colburnfinancial.com