A few years ago, I had a client ask me to speak to his 22 year old son around his financial matters.
The father described his son as bright young go getter. He has just come out of university and landed himself a new job as a scientist.
The father told me, “He is my future. I would hate to think that if something went wrong with him, my plans will be derailed because I have no other choice but to help him. He is now on a decent salary now and would love for someone to school him around financial matters so that he can work on these things while he is young.”
Pretty powerful (and clever thinking by the father).
Finally after 3 months the young man reluctantly came to chat to me.
When we got down to the nitty gritty, it turns out the son was earning $20,000 annually in a casual job while studying at university. Over the 3 years of study, he had managed to save a total of approximately $10,000. A very impressive feat!
Fast forward 6 months and since starting his new job he was on a salary of $65,000. He had managed to all but dwindle his savings, had taken a personal loan of $7,000 and in addition to this a sizable new car loan.
A significant step backwards!
How was this so?
His salary had tripled and in the space of 6 months yet he managed to be in a completely polar opposite position.
When I chatted to the son about this, we peeled back the layers. He finally revealed he felt he needed to be rewarded for all his hard work over the years. “I worked hard at Uni and I deserve to do something with that income”
The other thing was he was surrounding himself with other people who were earning similar levels of income. Lots of new cars, holidays & parties every weekend. He was told “Why are you driving a busted up old car, you should be driving a new one” or “Why are you saving? Come out and have fun with us!”
The reality is, when surrounded by people with that mindset, it is impossible for their tendencies and their bad behaviour not to rub off on you.
The son had fallen into the mindset that when you are working 50 hours a week you deserve to enjoy yourself. As a result, all the disciplines he had on the way through university had now disappeared (including his savings).
Human nature dictates that in an age of abundance, it is very easy to justify the trends of excess. Going along with everyone else instead of having something to fall back on. The time may never come but if it does, you have options.
“This document or website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making an investment decision. Charter Financial Planning Limited and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this document except for liability under statute which cannot be excluded.”