Dysfunctional Financial Personality #3 - The Foot Dragger
14 August 2006We’ve already discussed the Peacock, who feels the need to spend in order to impress. We’ve also taken a look at the Mattress Stuffer, who is compulsively afraid of risk and the stock market. Today, we’re taking a look at another specimen: the Foot Dragger.
The Foot Dragger is a very common personality type. Foot Draggers are defined by their constant procrastination of any thought or planning related to retirement. They just don’t want to think about it, and so they don’t. They go through life carefree until they hit their fifties - when suddenly retirement looms, and they haven’t saved much, if anything. This often results in panic and a last-minute attempt to figure out a retirement plan - which may or may not be possible, depending on how long they’ve waited.
Early in life, Foot Draggers spend pretty much everything they make. They may make token efforts at saving - a few hundred dollars here and there. Usually, though, they treat saving like a fad. They do it, and then get tired of it, and then put it off for just a little bit longer. They probably don’t know that much about personal finance early in life - and this is usually the big part of the problem. It’s rarely that they’re lazy - it’s that they don’t realize how much they really need to retire, and how hard it can be to get there. They think that if they save for ten or fifteen years, they won’t have any problems. They put off learning the details of retirement planning until they think it’s the right time - only to realize they’ve waited 25 to 30 years past when they should have started.
So what do you do if you think you might be a Foot Dragger?
1) Learn the basics of investing. If you’re young, read number five VERY carefully. You need to understand the concept of compounding - because this single concept is what causes most people to incorrectly think they should be waiting until they’re older to start saving for retirement.
2) If you’re young, start saving. You should start as early as possible - but age 25 is really the “must-start” date for retirement savings. That’s when you should be out in the world, making money - and you’ve still got 40 years for your money to grow. That’s a long time, and even a small amount of saving will let pretty much anyone, on any salary, have a decent retirement if they start this young.
3) If you’re under 50, come up with a detailed retirement plan. You still have time to start saving - but the older you are, the harder it will be, and the more likely you’ll have to live on less when you retire. The key point, though, is to plan. You need to know exactly how much you want to earn in retirement. You need to know how much money you’ll have to have saved up, and in what investments, to get there. You need to know how much you’re going to be saving every month, and what you’re going to put that money into. You can’t put off the planning part any longer - because if you find out you’re going to come up short, you need to be aware of that and try to cut your consumption to let you save more money.
4) If you’re over 50, make sure you plan your retirement as well as your savings. Here’s the sad truth: if you’re over fifty, on an average salary, and you don’t have anything saved up for retirement, it’s going to be very difficult for you to retire at age 65 with an income you are comfortable with. You need to come up with a savings plan - but you also need to start cutting how much you spend, and figure out if there’s any way you can retire on the cheap.
One way to do this is to ease yourself into retirement. You can keep working until 67 or 70, which is becoming very common nowadays. You can try taking on a part time job when you hit 65, so that you still have an income stream but don’t have to work full time anymore.
You might look into retiring to another country. This is a common choice among people who were Foot Draggers - many other countries cost much less to live in. In fact, there are places in Costa Rica and other countries that cater specifically to American retirees, and have large communities of older Americans living there. This can let you plan to live somewhere nice even if you don’t have much money to live on. We’re not talking about Iraq or Ethiopia or someplace - just poorer countries where the money goes a lot further.
Another “quick-fix” that helps many Foot Draggers is to move to a cheaper part of the U.S. - and take advantage of your home equity. If you’re living in a bigger city and own your own home, chances are you’ve got enough equity to downsize when you hit 65. Many people living in more expensive areas, where home prices are sky-high, find out that if they sell the house, they’ve got a few hundred thousand dollars of their own money from it. That’s more than enough to buy a cheap house in a rural area or a smaller town. Move to El Paso or Tulsa or someplace similar. Buy a house for $70,000 to $80,000 - which may be even nicer than what you were living in. Now you’ve got no mortgage, you’ve got some extra money in the bank, and your monthly expenses are a lot lower. It’s suddenly a lot easier to retire.
Finally, start pinching pennies now. You want to lower the amount you’re consuming BEFORE 65, so it’s not as big a shock when you hit it - and you’ve got more saved up for when you do.
Discuss this on the Free the Drones Retirement Forums here.
3 Responses to “Dysfunctional Financial Personality #3 - The Foot Dragger”
August 19th, 2006 at 1:01 pm
Dysfunctional Financial Personalities…
From Free The Drones Personal Finance Blog:
The Peacock, who splurges on expensive stuff to impress other people and keep up with the Jones.
The Mattress Stuffer, who is terrified of the stock market and ends up with tiny retirement savings by stick…
August 19th, 2006 at 10:04 pm
[...] This post is part of a series looking at the worst of the worst of people’s financial personalities. We’ve already discussed the Peacock, who feels the need to spend in order to impress. We’ve also taken a look at the Mattress Stuffer, who is compulsively afraid of risk and the stock market. Then, we looked at the Foot Dragger, who waits until the last minute to save for retirement. Finally, we saw the Emotional Spender, who can’t keep from blowing money to feel good. Today, we’re going to look at a personality you might not think is a bad one to have: The Obsessive Tightwad. [...]
August 25th, 2006 at 8:23 am
[...] Free the Drones explains what he believes is a Dysfunctional financial personality: The foot dragger. A very interesting analysis of people who live carefree and procrastinate in financial planning for retirement and what you should do if you fall into this category. [...]